Earlier this month, we talked about the benefits of establishing a board of directors for your small business. Did you know you should also be thinking about who will take over your business and position, even if you’re nowhere near retirement? That’s right, knowing who will take over your business is an important part of growing your company.
Right now, I have client who has done an incredible job of building a small empire over the last 30 years. His sales are solid, overhead is low and he has great employees. But now that he’s five to seven years from retirement and ready to enjoy some of the fruits of his labor, none of his children want to take over the business. Should he try to force one of them into his position or sell the business he loves?
My client isn’t the only one finding himself in this predicament. According to the Succession Reset: Business Succession in the 21st Century study, conducted by the accounting firm of Baker Tilly, four out of five family-owned businesses in the U.S. are not ready for succession.
If your company is operating without a succession plan, you could be jeopardizing not only your future, but that of your business. Here are some things to consider when naming a successor:
- THINK BIG PICTURE – Succession planning doesn’t have to mean just naming a successor. You may want to think big and consider all of your employees by including a plan for varying levels of management, from high-level executives to their direct reports.
- DON’T ASSUME YOUR KIDS WILL TAKE OVER– According to statistics, Millennials are job hoppers, who only tend to stay at a job an average of 4.4 years. This has resulted in a shift in the traditional handover from mom and pop to eldest child taking over the family-owned business. Many business owners are finding their children want to make a name for themselves, so they don’t have a family member who wants to take over.
- GROOM YOUR INTERESTED CHILD – So your oldest son doesn’t want anything to do with the family business, but your youngest daughter does; groom her for the position. Support for female executives seems to take a back seat according to the study. It showed that only 10% of those polled in the U.S. said the next top executive would be a daughter, compared to 19% overseas. Gender should have no role in naming a successor if that person is truly qualified and deserving of it.
- HAVE A SUCCESSION PLAN IN PLACE – If none of your children, your nieces or nephews or anyone else in your family is a suitable successor, then it’s time to put a succession plan in place. This will ensure business continuity, job continuation for your employees and piece of mind when it comes time for your retirement.
- SEEK PROFESSIONAL HELP – You don’t have to go about creating a succession plan alone. Ask a professional, like your accountant, your attorney or a human resources professional for help.
My client is feeling a lot better about the future of his business. He and I are working together on a five-year succession plan that I know will work out for him.
If you have questions about your company’s succession plan or lack of one, don’t hesitate to e-mail me or reach out to anyone on the Brigade Bookkeeping team. We love helping our clients feel at ease when it comes to any and all of their finances, current or future.
Have a great week!
