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Succession Planning For Small Businesses
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Article 1: The Importance Of Succession Planning
Many small-business owners work countless hours most of their lives to build their companies, but spend almost no time planning for business succession.
This isn’t really all that surprising. After all, most owners have a hard time envisioning someone else at the helm of the company they’ve spent their life creating. Throw in the complicated financial, tax and emotional decisions that must be addressed and succession planning is often simply avoided altogether.
Failing to plan for succession openly and forthrightly can result in numerous problems for your company, employees, family and heirs. Having a well thought-out succession plan in place years before your planned exit from the company, however, can pay huge dividends.
“Most small-business owners haven’t given succession planning any real thought beyond ‘I ought to do something,’” says David Geller, principal of GV Financial Advisors in Atlanta, Ga., a financial planning firm that specializes in working with private and family business owners. “But it’s critical that owners think through what they want to happen to their companies when it’s time to hand over the reins — whether by their own choice, or due to an unexpected death or disability.
“This means assessing your family’s financial needs and what you can realistically get for the business, and then coming up with a formal, written succession plan and communicating this to your key employees and family members.”
A textbook example of a well-planned succession was witnessed a few years ago when Jim Cantalupo, the McDonald’s chairman and CEO who had helped engineer a remarkable turnaround, died of a sudden heart attack. Within hours, the McDonald’s board decisively announced that President and COO Charlie Bell would succeed Cantalupo immediately and permanently.
In contrast, most companies only have an interim succession plan in place, says Geller, and they lose valuable momentum during the uncertainty and turbulence of the transition stage.
“The worst-case scenario planning of most companies is only a Band-Aid transitional solution, not a strategic solution,” says Jeffrey Sonnenfeld, as associate dean at Yale University School of Management. “McDonald’s directors, by immediately naming a battle-tested insider, showed the wisdom of having a succession plan in place.”
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Succession Planning For Small Businesses
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