Because succession planning for family businesses was the focus of company we launched FamilyBusinessStrategies.com to share what we were learning.
The very first thing our clients (and experience) taught us is that the best time to plant an oak tree was twenty years ago. The next best time is today. The same can be said for succession planning.
The longer the planning cycle the better it is for the senior generation as well as the heirs and successors.
The laws of compound interest work for you instead of the government.
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If you are the senior generation owner operator of your business, no doubt you will see what is succession planning differently than your son, daughter, son-in-law, etc. And I know you think about it differently than your spouse.
One thing however is likely to true of everyone – you are likely to think what is succession planning as an event, like buying a car, rather than the process it really is. A process that should have already started and one that will never be over.
Remember that the best time to plant and oak tree was 20 years ago – the next best time is today, so when it comes to what is succession planning, forget about what you haven’t done in the past and get on with it starting right now.
Starting right now, take the time to set your objectives. This is what will ultimately put you in control of the process and your future. What’s important to you and the rest of the people involved?
Once you’ve decided what’s important, what you want the business, its ownership and management, to look like in the future – you are well on your way to answering the age old question, what is strategic planning for you and your business?
Knowing what’s important, your ideal destination is step one.
Step two is assessing what the situation is right now, something you can do on your own pretty well. Leveraging the insights of your peers is better, because they will force you to test your assumptions.
They will make you prove what you assume to be true actually is – so that whatever future plans you make are more accurate.
From my experience the most difficult succession planning issues are not financial, not taxes, they are not business related at all in fact.
They are based on your ability or inability to talk with your family members honestly. If you can talk out the issues, concerns, dreams, and assumptions with each and every person affected by the decisions you will ultimately make – you will have the basis for your farm succession plan.
Once everybody’s on board with the future direction, seventy-five percent of the equation has been solved.
It is not your job to determine if what everybody wants is possible or not.
Once you’ve decided what you want the future of the business to look like, there are plenty of attorneys, tax planning experts, accountants, succession planning experts, and financial professionals who are ready willing and able to do the technical part.
Answering the question what is succession planning – the process, can be broken down into these critical steps.
For many of us this is the hard part. I always hesitate to ask for help (advice) unless I am committed in advance to go along with it. It would embarrass me and the person I asked what is succession planning, if I just blew off their advice, the advice I had just asked for. What works is when a group of peers, outsiders with no ax to grind are part of a continuing dialogue – a series of strategic conversations. Then it’s not about a single person’s insights but a collective back and forth around what has worked and what hasn’t for them.
If knowing what is succession planning (and then doing something about it) was easy you would already be on top of it and not wasting your time with this article. What makes succession planning so universally difficult is that generally no one is empowered to keep the process moving. From my experience the best person is someone directly involved in the business – a family member who has the best interest of the company at heart, and willing to push for answers till the get them.
It is simple really. What’s important to each and every one of you? Take into consideration what your spouse wants, what your heirs (people not involved in the business) feel is important and what sort of opportunity you want to leave behind for the next generation owners/operators of the business. Then consider what the situation is right now. From that point on it is a process of negotiation within the family, with their input of your peers and your advisors – to figure out what’s possible to achieve.
Often a major stumbling block toward what is succession planning is the willingness to do things differently in the future than they were done in the past. The important thing is your family and its objectives, not “the way we’ve always done it” coming from your lawyer or accountant. This company/farm/ranch etc. is yours – you know what you want the end result to look like. My bet is it can be done, if you are committed enough to tell your advisors that you want what you want when you want it and if that doesn’t work for them, you’ll find other better advisors. Remember who is working for whom.
When there is communication – often with the insights of peers to expand the options, and a planning coordinator on board to keep the process moving – write them down. Each note can become a brick in the wall. Every decision is remembered and each little bit of progress leads to the next and the next. Don’t make the horrible mistake of waiting weeks and months and then trying to remember who said what about what when and under which set of facts.
Establish a timetable for the events to occur.
Succession planning will go on forever, but it should not last forever. I was featured on a television special shortly after the release of our first book in 1986. There was a young man, the third generation of the family in the business, holding his little six month old son in his arms. That baby is now an active member of the forth generation of the operation. For them and the millions of business owners and farmers like them succession is a continuous process. However, there were many succession events and benchmarks along the way. You will be involved in your company’s succession planning forever – but it is not a full time job.
The meetings are the key to keeping the planning coordinator moving, keeping the advisors on task, and provide a visible opportunity to put check-mark’s in the boxes of the steps that have been completed. These business succession meetings keep the process on everyone’s mind, reassuring them all that this is important and it is being addressed – not just something than gets rolled out one a year to keep them quiet.
There is another option of course.
You can do nothing, put it off until it is too late, and let others control what ultimately happens to your business and your family. In that eventuality what is succession planning takes on a different – terrible meaning for everyone.
Without planning and communication, you will end up asking, “what happened, how did we get in this terrible situation?” instead of seeing the future you all secretly want.
There are numerous small business succession strategies, but they are not unlimited. And there are scores of succession planning professionals who can help you complete the process.
The stumbling block is that people like you, successful business owners wishing for a future beyond your lifetime for your family, who just won’t talk about it.
Remember Pogo’s insightful statement in the comic strip from the old days, “We’ve found the problem and it is us.”
To me, if you operate your organization to achieve your family’s goals, you are more likely to run it as a business – a successful business because there is so much at stake.
That means you will do what successful businesses do, develop and implement a business succession plan.
They know that their reputation as someone worthy of trust, someone who consistently delivers on their promises – is everything. Mistakes, whether real or perceived, are often pounced on immediately by unhappy or revenge seeking customers or competitors.
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