On a regular basis, I get to talk with other succession planners. One of the topics that comes up frequently is the mindset a lot of business owners have in regards to needing a “triggering event” to prompt succession planning. The unfortunate thing about a triggering event is that it is usually just that, unfortunate.
So, let’s assume that you, as a business owner, are thinking about a succession plan and you’re currently stuck on whether or not to proceed. Here are some questions you should ask yourself that will help you make that decision.
What will happen if I create a succession plan?
Here’s where you have a chance to begin weighing the benefits of moving ahead. Some of the potential positives include:
- Exploring how to reinvent yourself in your next life chapter.
- Developing sufficient liquidity to pull out of the business and still support your lifestyle.
- Estate planning that leaves meaningful assets to the next generation.
- Identifying and developing younger family members who will continue the business’s legacy.
- Creating a “management bridge” to help the next generation develop leadership maturity.
- Addressing potential conflicts among the next generation (probably your children) related to what you and your spouse “want to happen.”
- Building the present value of your business.
What will happen if I don’t create a succession plan?
Here’s where you pretty much turn everything over to chance with the hope that everything will just eventually work out. It’s possible, probable, and predictable that leaving everything to chance will have consequences like:
- Everyone will be momentarily (at best) stuck and unsure of how to proceed when you are no longer around.
- A spouse who has to rely on financial and business advice from people he/she may neither know well nor trust.
- Tax liabilities that force your heirs to pay a larger than necessary share of your estate to taxing authorities.
- Loss of key managers who don’t want to deal with the rocky transition of ownership.
If you decide to move forward with a succession plan, here are some additional factors to consider:
- What is the purpose of your succession plan?
- What resources do you need to develop the right plan for you and your family?
- What level of initiative do you need to keep things up-to-date and forward looking?
- What are the potential negative consequences of the plan, and how will you stay focused on what you want to accomplish?
- What kind of feedback systems will you use to monitor your progress?
- What is your timeframe, and how well is it communicated to other stakeholders?
Now as you read through this blog, you may well be thinking, “I’m not reading anything I haven’t read before. I know this.” The real power though in knowledge is in its application. So the last question for you to ask yourself today is simply this: “Am I using the knowledge I already have?”
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