Succession Planning from a small business owner’s perspective
It has been covered a lot – and in this very blog – so you may have heard it before: succession planning for business owners is essential. Stuff happens, and when it does, Business Owner, you need to be sure that your business survives by explicitly specifying how and to whom your business operations and ownership gets transferred. And it doesn’t take much to make that a complicated process….
Imagine a small, family business, Cleaver’s Cleavers, started by husband and wife, Ward and June. They are incredibly proud of what they have built; they have been active supporters of their community, and they are viewed as a quality employer with an exceptional product and superior customer service. They’ve managed their business well for over 20 years and their 3 sons have been active and involved in the business to varying degrees.
Yet, the kids have very different ideas about Mom and Dad’s business. Adopted son Eddie wants to grow the business — he has been talking to Mom and Dad for years about “sure-fire, guaranteed” ways to “take the business to the next level” by “thinking outside the box” and “monetizing The Cloud,” thereby “dominating the global kitchen knife market.” (Yes, Eddie just finished business school.) Their son Wally wants to continue on the current path following the sound 20 year game plan of steady growth through continued “customer-first” business policies and hands-on management. Their youngest son Theodore doesn’t care – he would actually prefer to flip the business so he can spend his time on international butterfly chasing expeditions; however Theodore’s wife Judy would love to stay involved in such a well-respected family-centered enterprise.
Without complete succession planning, death or incapacity of the founders of this company could quickly lead to chaos, infighting and potentially the demise of Cleaver’s Cleavers. The years of time and effort that have been dedicated to the creation of a family brand and business could rapidly become meaningless.
While there are countless ways to approach such a scenario (a good attorney can help see the options as well as construct a clear, tight, set of documents to reflect the desired decisions), the key is to do it. Business owners need to contemplate not only the financial implications of their business succession planning, but the personal, practical and operational issues as well.
Even if you currently feel that you, your business partners, and your heirs are all on the same page and will continue to agree, circumstances and opinions can change over time. If you all are currently in agreement, making your Succession Plan official at this time is (when things aren’t contentious) easier than when disputes arise – imagine looking back at this as a missed opportunity for avoiding conflict and pain.
As for Ward and June, they have a clear vision of their wishes for their business and for their sons; with thoughtful and complete planning they are able to communicate these wishes to their children, as well as to their employees and the community. And they’ve minimized their tax liability too.
