What does that mean for your business?
The HBO show, Succession, follows a family that owns a media conglomerate. The family patriarch heads the corporation and when he experiences a decline in health, his four children vie for prominence within the company. While this may be a fictional business and a fictional family, the main point is deeply rooted in reality — a business owner who does not have a clear succession plan.
As an owner-manager, not having a succession plan in place is a problem. Think about it: maybe you are young and in good health, but if you are hit by a bus tomorrow, what would happen to your business? Whether that bus kills you or simply leaves you unable to manage your business, without a succession plan there is no one in charge of your company.
If you are also the sole signing officer (a practice that we do not recommend), it means your business operations no longer have access to its finances. Employees can’t get paid, suppliers can’t get paid and operations basically cease while court officials sort it out. We were involved in a similar scenario recently; we were retained by a business whose owner had died. He had been the sole signing officer of a company without a succession plan. The accounts were frozen and it took over a year to untangle the business from government bureaucracy. Don’t even get us started on what would have happened to the business if he also didn’t have a will! (Which, sadly, is also all too common.)
Proper succession planning takes time to do right; and we get it, it’s time that many owner-managers simply don’t have. But at some point, you’re either not going to want to run your company anymore, or you won’t be able to — those are the only two ways out of being an owner-manager.
If this is your initial foray into succession planning, the first thing to do is consider what you want for your company in the future. Your three main choices are:
- Pass it down to a family member. A common wish for business owners who want the business to remain a family one. But it’s important to make sure that your chosen family member truly wants to own a business.
- Sell it to management. Another common approach to succession planning is to choose a trusted manager you can groom to take over upon your departure.
- Sell it and live off the proceeds. If there’s no one you want to leave the company to (or no one who wants it), then planning ahead for when you sell it is your best option. To get the most out of the sale, it’s important to start planning several years in advance.
Remember: once you do create a succession plan, it is not something to simply put on a shelf until it’s needed. Like a will, it is a living document that must be frequently reviewed. At least once a year, look it over and make updates, where appropriate. Life changes quickly, and savvy business owners not only have a solid succession plan but also make sure it is always reflective of the changing world around them.