Rather than a single, dramatic movement, the smooth succession of a business more resembles a flow of events that occurs over time. Like a well-run relay race, the handing over of a company should be graceful, carefully strategized and well executed if it is to be successful. Unfortunately, the majority of business owners neglect to plan so seamlessly for their own succession.
More often than not, the reasons are psychological. No one likes thinking about their mortality, and entrepreneurs are no exception. Moreover, some owners so closely identify with their ventures that they can't imagine their offspring of long hours and hard work continuing without them. Others believe they're too busy to plan for the day they will leave and consequently put off succession planning until tomorrow.
But tomorrow may be too late. Serious illness, disability or death can catch a firm by surprise. A crisis such as this brings great upheaval, and it is difficult to make rational decisions in the best interests of a company when emotions are running high. That is why a well-thought out succession plan is essential to the continuation of a business, no matter what its size and structure.
The Challenge
Ninety percent of U.S. businesses are family-owned, and one-third of the Fortune 500 are either
family-owned or family-controlled. Yet only 30 percent of family-run companies today succeed
into the second generation. An even smaller 15 percent survive into the third generation. The
reason, according to many experts, is obvious - the lack of an orderly succession plan.
Owners should begin planning while they are still healthy and active in their enterprises. If you wait until after you're 65, you can't do many of the jobs associated with succession planning, such as teaching, explaining how the business operates, and passing on the spirit and vision with which it was founded.
The time to plan is between the ages of 55 and 65, experts advise. And the handing over of the baton, the plan itself, should be a process, rather than a single event. Some succession consultants recommend a three-to-five year plan while others advocate five to 10. Some even recommend 10 to 15 years. All agree, however, that the more time allotted for planning, the better the outcome will be.
Adequate planning time enables you to test potential successors in different roles and evaluate their maturity, commitment, business acumen and leadership abilities. If you've already anointed your successor, adequate planning time allows that individual to build up expertise so the passage transpires so gracefully that no one in the company even feels it happen.
Choosing Your Successor
The Financial Aspects Of Succession Planning
