Outcomes of Succession Planning
What is the typical outcome of succession planning? This is a frequently asked question. The typical results from such planning end up with a transfer of ownership as well as management. Some of the results include:
• Management buyout
• Outright sale of the company
• The transfer of stock to children
• An employee stock ownership plan (ESOP) or other internal transfer of ownership
• Sometimes you have a parent retaining control with a child stepping into the CEO spot
• Other times you have an owner retaining control with a manager stepping up to CEO
Regardless of which direction it goes, succession planning should provide for an integrated approach that considers the organization, management, and the ownership. There is a lot of work that needs to be done to achieve the correct balance point for all of the involved parties.
Because of the many issues and challenges facing owners of family owned businesses, it is imperative that they begin this process and avoid procrastination that only invites disaster and problems. The price of the succession and transition planning will be well worth the time and effort.
This planning effort should be done by professionals experienced in dealing with these areas. They will help facilitate the strategic thinking of the owners to create a solid ownership plan. These professionals will also help to coordinate work with other professionals such as the CPA, attorneys, and other specialists likely to be part of the process.
This type of approach represents the best way to preserve the value created by the business and have it transferred according to the desire of the owners. Application of a proven blueprint avoids mistakes, saves time, and keeps legal and professional fees to a minimum. We’ll talk about financial planning, family planning, management, and organization plans in future posts.
The key here is to take a systematic and proven approach to the process. If you don’t do the planning, someone else will do it for you and it might not be the way the owners envisioned.