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If You’re Planning to Sell, Why is a Succession Plan Important?
January 7, 2008
Business succession is a golden opportunity. With owner motivation and a reasonable perspective, we have a vision. And with a vision, we can have a succession plan. However, a vision to pass a business to the next generation can only become a plan if there is a qualified successor.
As my experience validates, some owners do not have any successor contenders and some prospective successors are, at best, pretenders. I offer this simple advice to those business owners who are confident in their successor contenders or those who are concerned that they are only dealing with pretenders: the sale of a business is a viable succession planning alternative.
But one might ask, “If my successors are not even good pretenders, why do I need a complex and expensive succession plan to sell my business?”
Consider that succession is simply the continuation of success, the fundamental component of value. Succession planning is the process of providing for the continuation of success in lieu of a multitude of challenges, including death of the owner(s), loss of key managers, loss of a critical product, loss of credit, market down turn, etc. Succession planning builds value.
Secondly, the acknowledgement that sale is a viable succession alternative precludes family member entitlement, setting a standard for family members earning the right to be successors. This acknowledgement also conveys to management that they have a vested interest in succession and solicits their proactive involvement. Respecting the possibility that the business may be sold fundamentally notifies everyone that there should be no assumptions of a “succession gimmie.”
By considering sale, the message is that the achievement of seamless succession with the least disruption is dependent upon everyone regardless of preconceived bias. The goal of succession becomes more important than perpetuating the business to family successors. Subsequently, the synergy created by the enthusiastic pro active initiative of owners, family members, key managers and employees to work together for what they agree is a worthwhile goal, develops into the largest segment of business value. This value becomes magnified when there is a premature death or when everyone recognizes that Junior is a pretender and not a contender.
Therefore, regardless of your fortunate circumstances, your unfortunate dilemma or your goals, forthrightly and aggressively addressing the issues that impact the continuation of success is good karma. Let’s look at likely buyers next.
Next posting: If I am considering sale of my business as my succession option, who should I look to to ensure my family and employees will be taken care of?
Posted by Loyd Rawls on January 7, 2008 | Comments (0)
