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What Succession Planning is Not

January 27, 2015

I’ve gotten calls that indicate that there is some confusion about the succession planning process.  Succession planning is usually a transfer to someone that has worked in the business for a long time who can and wants to take over.  Here are some explanations of what succession planning is not:

  • Succession planning is not transition or retirement planning where someone is brought in to eventually take over with plans for the owner to gradually ease out of and leave the business.
  • Succession planning is not where plans are made to position the business for a sale where the owner has a blunt ending to their involvement in the business except for a short phase in period assisting the new owners.  The efforts to stage the business for a sale can take a few years and needs special care and work.  Also, the owner would receive the right price for the business in cash or some solidly backed notes from which a core of their retirement cash flow would be generated.
  • Succession planning is not slowing down, although that is what happens when owners do not face reality of their getting older and refuse to consider any of the viable alternatives to slowing down.  There is nothing that can be done for these people.  They work until they drop and the value greatly diminishes.  However, they probably will still earn a reasonable income which usually would be more than the income from the sales proceeds had they sold. The offset here is that they like what they do, identify with the business, do not see themselves being independent from the business, don’t mind continuing to spend substantial time working, and are probably happy with the ongoing situation.  Retiring and the lack of realizing the full value for the business is not a strong concern.
  • Succession planning is not pulling the trigger.  You can’t wake up one day and decide to sell to the successor unless there was pre-planning to make sure the successor is trained, capable, empowered, and who customers, employees and suppliers are familiar with and will recognize as an effective replacement.  Also the financing arrangements need to have been organized for this eventuality.

Succession planning is an important process for some, but not everyone.  Each owner needs to consider what they want for themselves, how to get it and the alternatives.  Blogs such as these are intended to convey information and provide food for thought.  I hope this helps.  Good luck!

One Comment leave one →
  1. February 13, 2015 10:19 pm

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