It is a given, among professionals who work with them, that small business owners are bad at succession planning. It’s also a given that being bad at it is entirely normal. The owner who follows a well thought out and executed plan culminating in a successful retirement is the exception rather than the rule.
Many people are uncomfortable with, and resistant to, planning for their retirement. But, this is especially true of the independent entrepreneur who’s the heart, soul and brains of his organization. He finds it difficult, often impossible, to give up control of all he’s built over years. His mantra is “there’s time, it’ll all work out”.
Unfortunately, it usually doesn’t work out and this belief sets the organization up for failure. The number 1 reason companies don’t survive into the next generation is the lack of a properly implemented succession plan. According to a 2013 Small Business Administration (SBA) study only about 30% of businesses survive a transfer of management into the 2nd generation.
This number is alarming when you consider that family businesses comprise 90% of all small business in the country and 88% of owners want to pass it on rather than sell it (SBA, 2013). The only succession plan most of them have is to be an absentee owner, while the successor — a family member or key employee — runs a profitable concern which will support him in his retirement.
Therefore, most successors aren’t successful and the company doesn’t survive the transfer of power. Not only does this leave him with no retirement it often leaves him with debts and a tarnished reputation, because there was no proactive plan. Too often when the average owner is ready to relinquish control and retire he’s already run out of time for a successful changeover.
There’s no one size fits all plan so it’s important to seek outside help for organizational, management, financial and legal issues which will arise. Effective succession planning is a challenging task, but worth the reward. It’s good stewardship of your company’s, employee’s, customer’s and family’s future.
