Some would say “No.” And they might be right. However, I would encourage them to talk with Jay (not his real name) before they make a final decision.
We had been talking with Jay for several months about why a succession plan would be important to him. “My children have no interest in the business,” he told us. And, since he had no brothers, sisters, or other generational family members involved or interested in the business, he could see no practical value in moving ahead with our recommendations regarding succession planning.
Just a few weeks ago, Jay called. After the customary social exchanges, Jay said “I have to tell you what happened to me yesterday. Since we talked last,” he began, “I’ve been approached by one of my competitors. Things started off innocently enough with some general conversations about exit strategies. One talk led to another, and then we began to get serious about my selling the business to him. After a couple of meetings, I was beginning to get excited about the idea. We agreed to meet to start talking about price.
“When he showed up with his advisor, one of the first questions was ‘Can you show us your succession plan?’ I had to tell him I didn’t have one. For all practical purposes, that was the end of the conversation.” There was a pause. Then he continued, “Tell me again how succession planning adds value to my business.” And, as the saying goes, the rest is history.
The rest of the conversation with Jay focused on the primary reasons that succession planning adds value to any business. Here are the key points to keep in mind:
- Well designed succession plans include a Strategic Plan that becomes an internal marketing tool. By involving your Very Special Key Managers, you can strengthen Management Synergy and Teamwork, ensure Leadership Continuity, and boost Business Performance. These three outcomes build the value of your business and make you more attractive to prospective buyers.
- The government believes that it is entitled to 45% of your estate. Use estate planning to drive that percentage as low as possible. Even if you have no heirs, your estate will more than likely have beneficiaries, charitable or otherwise. Understand the value you have created and maximize your legacy endowment.
- A good succession plan is at least bi-focal: Family and Business. So, it’s more than wills and trusts. The business focus can free your time for other pursuits that deal with activities that now give you more pleasure, enjoyment, and satisfaction than the business.
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