Have you decided on your succession plan yet and will it work for all concerned? At some point, you will have to organise what will happen to your business if you can no longer continue running it for one reason or another. Having a succession plan already in place, means disruption should be minimal. With so many young and skilled workers leaving the country and the baby boom generation nearing retirement, there will be many businesses facing succession problems if they have not already organised their plans. Partnerships especially need forward planning and open discussion regarding retirement so bad feeling can be minimised. Also, with a plan in place, there will be continuity if something untoward happens to a partner and they cannot continue in their job for any reason.The main issues to decide upon are as follows:
- Who will be taking over from you – family members or existing staff, in either case have they had sufficient training in the job for a smooth transition and will there be someone to mentor them or discuss any problems with.
- Is there a specified date for it to take place – i.e. your retirement age or age of the person taking over from you, or perhaps an expansion plan for the business whereby the new head of the company could still use your expertise and experience on a part time basis.
Ideally your plan should be in place several years before the expected event and all legal papers signed and a business continuity plan drawn up. The latter should state what you expect the business to be doing in terms of management and continuation of ownership so that client relationships are not adversely affected. Legal paperwork regarding shareholdings and purchases and sales need to be specified to avoid any problems on succession.
Ensure you have insurance to cover an unexpected event such as death or disability. This can aid your family or partners to pay for any immediate expenses they are forced to deal with without the need to use their own funds. Confirm that the insurance you hold will be adequate to cover such costs and ongoing premium payments and policy ownership are fully understood.
Your plans should be known by your key staff so that they know where they stand and will not leave the firm just when they are most needed. The day to day running of the business should be able to continue at the time of any changeover and conflict between staff members should be minimalised if a plan is in place. The person who is taking over your job does need to know in advance, whether a family member or member of staff, and that person should be the one best qualified for the job – which may not be a family member even in a family firm. In fact most ‘family firms’ only survive the first generation of ownership, in the second generation only 30% are still family run and by the third only 12%. It is not a good idea to just leave your business to your surviving spouse (unless they have indicated they are happy with that) as they are then left with any problems which may arise including how to treat their children fairly.
There may initially be emotional aspects to overcome with the implementation of a succession plan but with discussion a mutually agreeable plan should be possible with all parties concerned.
The benefits to having a succession plan are many the main one being that once you have handed over the reins there should be minimum disruption to your business for both your staff and your clients. Your staff will know they have their jobs and your creditors should see no difference in their relationship with your firm. Your banks and finance companies will continue to have the same confidence in your firm with regard to their business dealings with it. Finally you can choose when you wish to retire and ensure that you can continue with your current lifestyle as well as avoiding conflict with family and partners as they have been forewarned.