Successful Succession
As our entrepreneurial class ages, business succession planning is becoming more of a “thing”. A recent newsletter by my friend and colleague Barb Stuhlemmer (https://blitzbusinesssuccess.com/exit-readiness-are-you-ready-to-step-back/) and ongoing workshops by my friend Derek King (https://nesbittburns.bmo.com/derek.king/meet-our-team) are examples of the level of interest on the part of planners, if not on the part of entrepreneurs and professionals. Back in the day, I used to work with Sandra Pollack (https://trimaranadvisory.com/) who is a designated Family Enterprise Advisor. These professionals are among many who work with willing and aware individuals and companies that want to prepare for succession. I can list another dozen very capable persons who can guide you in these matters, and would be happy to connect you to one or two depending on your geography and your needs.
The sad truth, though, is that timely planning is the exception, not the rule. Back in the day, it was my experience that many of my most successful entrepreneur clients got dragged into my office by their significant others and sat there grumpily when they really wanted to be back at the shop making money or out playing golf.
It was also the sad truth that most of these guys just assumed that at some point “the kids would take over”, there would be some kind of handshake deal, and they’d semi-retire with long vacations and lots of golf and curling, going into the office to boss people around when they felt like it. Nothing could be more improbable.
In reality, it was rare to find “the kids” anywhere near capable of taking over, and in fact, most were not interested. Some had gone on to be successful surgeons in Texas, others happy to be playboys on Daddy’s money, some had serious addiction issues, but few were those who not only were capable, but interested in succeeding their parents’ business.
The most common problem I encountered was that no thought was given to succession until the first generation was either suffering health issues or couldn’t wait to take the door. In other words, there was precious little time to plan.
Even those who intend to keep working so long as they draw a breath need to consider succession. Some of the worst corporate nightmares I ever had to resolve were of unready business owners who dropped dead on the golf course. Post-mortem succession planning is a contradiction in terms, and the only guy who rubs his hands in glee is the Minister of National Revenue.
Good succession planning typically revolves around two things: the money, and the “who”. The “when” and the “how” follow after. Money, of course, involves the tax man, and most good succession tax planning requires several years’ set-up before the trigger is pulled. The “who” is particularly important if you’re not going to get all cash on closing. If there are going to be years of payments, you need to be sure the successors are going to be successful, at least until you get your last payment, and you need a way of enforcing and/or regaining control if they mess up.
Enough preaching already! I’m no longer in the business of succession planning, but if you can’t say that your business would carry on seamlessly if you get eaten by a shark, you need to make an appointment. Now.