by Dave Driscoll
Passing your business to the next generation of family or key employees is hard – no doubt about it! It’s a process that current leadership knows must be done, yet no one really wants to do it. Just anoint a successor and be done with it – welcome to Vegas, baby!
OK, you know what’s coming – the probability is that the transition and performance of the anointed one will be rocky and fraught with financial minefields, disgruntled managers and overall uncertainty. Without thorough planning, you are risking the company’s future performance and your own future financial security because chances are that there is no big bag of money at closing for the departing leader.
You must plan the selection of successors with an even greater level of detail and determination than you would plan a marketing initiative, machinery/equipment acquisition or hiring of an employee. Perform your due diligence as you would for any other critical company initiative.
To increase the probabilities of success, you must create a vision of the desired outcome, with hard facts, years before the transition.Succession deals with people who are important to you – maybe siblings, sons or daughters, nieces, nephews, longtime employees, or key management. You have interacted with them over many years, in many situations and deepened your affection, developed relationships and increased dependence. Just because you love these people and want to do all you can to ensure their futures does not mean they are automatically in line to succeed to the throne.
You must understand and honestly assess the qualities, intellectual competence, leadership, personality, skills and abilities of everyone helping run the business. This assessment is best performed by licensed industrial psychologists. These professionals will give you the insight into each individual and provide comparisons to peer groups in similar positions. Their job is not to select the successor but to provide you with information to make better-educated decisions – decisions that will affect the future of everyone in the company and their extended families. As any head coach would say, “Know your team” – you don’t select an offensive front lineman to be the quarterback!
Second, define what you are looking for in your succession. What is your vision for the future of the business, for your personal future, your legacy and your Life Beyond Business? Industrial psychologists have tools and insight to help you understand how to satisfy your social, emotional and leadership needs for your new role after business ownership. Rely on their expertise to make sure you will have a fulfilling retirement.
Third, find out the visions of your management team, family members and key management. How do their individual, professional and personal goals and visions align with your vision for the business?
This process is best driven by outside resources following a proven plan to help you, the exiting owner, temper the emotional intensity and gain objective perspective to make prudent, informed decisions. Remember, you are not likely to receive a big bag of money at closing; in fact, it may take years to receive your value from your business. Your and your family’s future financial security will depend on the choices you make regarding who eventually succeeds you. Take the time to plan your success(ion)!
Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions business broker, business valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.
Submitted 9 years 336 days ago