A succession plan is as important as life insurance. Please consider your options as early as possible in your tenure. If Buffet were to retire today, would his company find the talent to lead them? Are you certain that your company would continue on as you had hoped? Thinking ahead is a cardinal rule of business. In addition to monitoring the daily operation of your business, you need to think about the future. And, as difficult as it may be, it’s important to envision the day when you no longer will be in charge. You leave your heirs and your business vulnerable to considerable estate taxes and management upheaval if you fail to plan ahead.
Recent surveys provide some alarming statistics. Only one percent of family-owned businesses in North America reach a third generation with family members running them. Another report shows that 30 percent of all family-owned businesses have not considered a successor, with only 63 percent having done so when the owner has already reached age 65. Finally, another recent survey shows that more than 58 percent of small-business owners list inadequate succession planning as the biggest threat facing their business.
Given the fact that 90 percent of the 18 million-plus businesses in America are family-owned and managed, it’s obvious that a solid succession plan will be important should the majority owner die, become disabled or retire.
Ten Considerations in Creating a Succession Plan
- Have a valid reason to sell or transition to new leadership
- Do not wait until you have to sell for economic or emotional reasons
- Gather the information needed
- Be a part of the marketing team
- Maintain confidentiality
- Think like a potential buyer
- Do not let things ‘slip’ because you are selling
- Engage professionals who understand the sales process
- Be patient and study every offer carefully
- Help create a win-win situation…This is vitally important
The real estate industry clearly needs to focus more attention on the succession planning process. As the broker/owner population ages in our industry, the need to plan for strategic ‘next steps’ becomes ever more urgent. Succession planning cannot be viewed ‘in a vacuum’ and should be accompanied by an examination of your business model as well as an assessment of your company’s ability to sustain long-term viability and promote long-term growth.