One of the biggest, if not the biggest, challenges small to mid-sized business owners face is that of succession planning. Finding the right person or people to hand the reigns over to should be a process that lasts years not months. It is difficult to accept that whoever that next person is, they won't be you and they won't run the place like you either.
So what can be done to increase the success of handing things over to the "next generation"? First of all, don't limit your options and plan plan plan. One of the most important things I have learned over the 20 plus years of being a business owner and advisor is to make sure you have an exit strategy as early in the game as possible. I now teach young entrepreneurs to make sure part of the business plan is an exit strategy. What options are there?
For the most part there are 3 options to exit. First is to hand it over to an insider. That would be someone that has been working for you that understands how the business works and is willing to pay for the opportunity to drive the bus going forward. Second, is a sale to a competitor or larger enterprise that has an interest in your market and your brand. The third is a variation of the second and that would be to merge with a competitor or a complimentary business that gives both entities a benefit. There is the option to liquidate or close the business but I don't think of that as succession planning even though it is an exit strategy.
Finding the right player is always the difficult part. A successful business almost always has clearly defined core values and you want them to stay in tack so you need someone that understand and believes in yours. You also want to make sure there is strong leadership and passion for the business along with aptitude, compassion and strong business acumen. Now you start seeing why this is such a challenge! The good news is that this happens all the time so you aren't the first person to have to do this. The bad news is that at least half of these fail within the first 3 years.
The point here is to take your time and think about how you can best transfer what you know about the business, people, customers, process, market, industry, and all the tricks of the trade to that lucky chosen one. Invest time and money to educate and edify or to investigate a potential buyer/merger candidate to find the best fit possible. Understand that there is great value in mentoring, shadowing, selecting a protege, or whatever you want to call it. The training for the next leader should be much different than any other position in the business because the business owner is a unique position.
Be aware that businesses, like people, have a period when they are in their prime so don't wait too long if you want to maximize the chance of success and value.
Victor D Puchi, CPA
vpuchi@randacpas.com
