Your small business has been successful. It has provided you and your family income and personal satisfaction. It’s been a good run and you’re ready to move on to the next phase of your life – do some traveling, go fishing and spend time with the grandkids.
About 2 months before you retire you tell everyone the succession plan. 1. The business will provide your retirement income. 2. Your son, daughter and/or key person will take over. 3. You will have a party, eat some cake and make a speech. This is the most common succession plan among small business owners.
However, the belief that it’s enough planning and that “everything will work out” is usually wrong. It rarely works because it’s not actually a plan. A successful succession plan takes time, money and effort. It can be one of the most difficult challenges an owner will face. It’s difficult for a variety of reasons.
The owner may have become complacent over the years and doesn’t want to make the hard management/personnel decisions that need to be made, which are mandatory in a good succession plan. A poor management choice can close a formerly thriving business in just a few years.
A successful plan needs time and may take over a year to implement. This can be hard for someone who has a tough time giving up control or is conflicted about retiring. If procrastination is a part of his management style he may be counting on someone else “to figure it out when I’m gone”.
Finally, outside assistance is essential and many owners find it difficult to see the need for and to ask for help. Now is not the time for your pride and ego to get in the way. A good plan requires the input of professionals who understand the management (consultant), legal (lawyer) and financial (accountant) issues.
Because it’s difficult most owners avoid succession planning to the detriment of the company, their employees and their retirement. Avoidance and passing the buck seldom works and can lead to damaged personal and professional relationships, decreased wealth and closure of the business. It’s not uncommon for owners to have to come back and attempt to rescue it.
As Yogi Berra said, “It ain’t over ‘til it’s over.” A complete, thought out and well executed plan starts well before the actual day of retirement. This approach provides the needed stability to make a complete transition, one which safeguards the business’s wealth and sustains harmony among the employees. Successful owners manage the succession plan as they have managed their company, with forethought and good stewardship, right up until the cake and speech.
