When owners think about succession planning, they naturally correlate it to retirement – a topic no one really seems to enjoy talking about, at least in detail. In many cases, the subject gets put on the back burner. Here’s a brief look at four of the common obstacles that often get in the way of successful succession planning.
- Assuming the next generation will take over. Many owners have a strong desire to pass the business along to their children. However, depending on your circumstances (and theirs), that may or may not be a viable option – even if the next generation is already employed by your company. It is best to have family meetings to discuss the process and assess your family members' level of interest in one day running the business. Working in the business and being the ultimate decision maker are two very different things, and your “target” family member may have no interest in becoming the next leader.
- Dividing the business among heirs. Deciding how to divide the business between heirs can be a double-edged sword. On one hand, it seems only fair to give equal ownership to each of your children. On the other hand, some of them may have played a larger role in the company’s success and may offer more potential for its future. Blindly giving equal ownership to all heirs is generally a recipe for disaster, and it can lead to family conflict. If a particular heir does not want to be involved in the business, devise a way to provide that person other estate assets. It is best to leave the shares of the company in the hands of the people who will have the biggest impact on its future success (or failure).
- Avoiding or dreading retirement. It is easy to view succession planning as an end point, but in reality it is only the end of one chapter in life and the beginning of the next. It helps to develop a “life plan” to assist you in transitioning smoothly into the next stage of your life. Take the time to formulate what that next chapter will look like; this will help ease any anxiety about retirement or what life may entail after you exit the business.
- Believing you have plenty of time. Perhaps because of the previous obstacle, many business owners leave succession planning until it is too late, if they have a plan at all. In order for succession planning to be successful, you need to lay the groundwork over many years. I would argue it is never too early to start succession/exit planning. The smoother the leadership transition, the better the odds the business will prosper well into the future.
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