Succession Planning

We can all remember our favorite restaurants or other small business that closed upon the death or retirement of its’ owners. We can also think of a restaurant or other small business that was never quite the same after its owners sold out. Between these two results is what estate planners call the challenging world of “Business Succession Planning.”

In the world of small businesses, more fail than succeed at succession planning and even more fail to even attempt succession planning. While we can all point to automobile dealerships or other examples of successful transition between one generation and the next, these success stories are more the exception than the rule. Looking behind the scenes of these “success stories”, you often find disappointment, hard feelings, and even lawsuits. Having participated myself in a number of both failures and success stories, the two main ingredient of success are good parenting and good advise. While some family businesses can rely on a product or franchise that will succeed on its own, most small business owners face constant challenges of government regulations, competition and taxes. It is no wonder that so many small business owners are both too tired to continue and too busy to quit. A family committed to succession planning and a smooth transition of control between generations face a daunting challenge. Succession planning is not a short term project or a task that many business owners can accomplish without outside help.

Unfortunately, many advisors who provide good legal, accounting, and insurance or investment counsel face succession planning challenges in their own business. While my next few articles will discuss succession planning for a family business many of the points and pitfalls apply to any business or to the passing of wealth between generations. The older generations often needs as much training in their role as the younger generation. In my next article, we will start by speaking to the current owners about how to succeed in succession planning. The children or other perspective new owners will get their turn, including the responsibility they have to look in both directions as the mantle is passed.