Aug 26, 2008
Procastination—The Bane of Succession Planning
Recently, Fortune Small Business magazine conducted a survey of owners of privately-held, small & mid-sized businesses in the USA. Two questions were asked:
- How critical to your business’ survival is succession planning?
- Have you done anything about formalizing a succession plan?
The results were extremely interesting. More than 95% of the respondents said a succession plan was critical to the long-term survival of their business, but a staggering 85% had not done anything to formalize their succession plans.
This survey reinforces information we learned first-hand several years ago when leading a continuing education course for Certified Financial Planners (CFPs). The subject of the course was “Succession Planning for Business Owners.” With more than 200 CFPs in attendance, we asked how many of their business-owner clients had formalized their succession plans. Less than 5% of those in attendance had clients who had formalized their succession plans. More startling, the CFPs in attendance reported less than 20% of their business-owner clients had even discussed their goals for succession, let alone put these goals in writing.
We all know the old saw, “A failure to plan is a plan for failure.” We also know most people do not like to face their own mortality (why is it people say, “If I die” and “When I win the lottery,” isn’t this fractured logic?). The reality is, every business will change hands at some time…it is inevitable.
Everyday, the Wall Street Journal and the business section of your local newspaper are filled with stories of Private Equity Groups (PEGs) acquiring…and selling…businesses like yours. Interestingly enough, PEGs never make an acquisition without defining their exit options…before they make their investment!
Take a tip from PEGs, professional business acquirers, and plan for your own exit from your company. As a business owner, you owe it to yourself, your shareholders, your employees, your customers/clients and your suppliers, to start examining your exit options. If you are not proactive about this process, the process will control you…and you just might not like the results.
Popularity: 60% [?]
August 27th, 2008
#1. Thomas William Deans
Dear Jim:
Read your blog with great interest.
In my new book Every Family’s Business I suggest exactly as you that every business must be for sale–always. I go further and offer 12 quetions that every business owner should ask themselves in order to drive the finality of their business. The book takes a dim view of gifting operating businesses to the next generation, arguing that this is precisely how families destroy wealth and family relationships. What makes the book different is that the 12 questions allow business owners to build an exit plan collaboratively with their family, making the sale of the business the “objective” –SOMETHING TO CELEBRATE. Having run a family business –having come from three generations of family business founders and sellers, the book offers a different take on succession planning. The legacy that generations of our family have passed on is not company names or brands but rather the wealth crystalized through the sale of businesses. The legacy also includes the knowledge that understanding when to exit a business is as important as knowing when to start or invest in one. The book helps business owners never to confuse their love for Business with their love of “a” business a subtle but crucial distinction for the preservation of generational wealth.
With 24 million closely held businesses in North America being led by aging owners, the services of your firm will become increasingly important.I beleive I have a book that can help you help many of these firms protect the value created in their businesses through the planning and execution of their sale.
I would be happy to send you a complimentary reveiw copy and hear your thoughts.
Sincerely,
Thomas Deans Ph.D.
Best-selling Author of, “Every Family’s Business: A Blueprint for Protecting Family Busiess Wealth”
http://www.ProtectingFamilyBusinessWealth.com