Roadmap to Understanding Succession Planning
It may be that you have no experience in succession planning. It may be that this is the one and only time you ever transfer ownership of a business you built. You are anxious about it, and you want to do it right.
There are many reasons you could be looking to transfer ownership of your business. It could be time to expand, double in size, or simply to move on with your life. For example, you may be selling anywhere from 1% to 99% to a future business partner who has skills that offset your weaknesses; or you may be looking to transfer your business to a family member, your employees, or to a third party. No matter what kind of succession you are thinking about, each process is stressful.
I can be empathetic when it comes to the anxiety surrounding succession planning, as I have experienced multiple successions during my career. I have transferred businesses to an equal partner, a minority owner, and even to a likeminded third party. I have also purchased a business from a third party. Each transfer had its own unique flavor, but ultimately the goal was to find the best possible outcome for each situation.
One option is to transfer your business to your employees through an employee stock ownership plan (ESOP) or some other method of transfer. This can be very beneficial for your clients. I have experienced this process numerous times in my career, and each time yielded a positive result.
A second option is to transfer your business to a third party. If done correctly, the outcome is sure to be satisfactory. For example – in the year 2000 I sold 50% of my accounting practice in Dallas to an individual by the name of Jeff Bergman; due to that transaction, we were able to triple the size of the Dallas practice before I moved to Houston, TX in 2004.
No matter how you choose to tackle the succession of your business, it is so important to select the right person to sit at the helm after you move on. As business owners, we’ve all had clients who rely on us individually, and we can’t help but wonder, “How could someone else run this business, and will my clients be able to do without me?” Fortunately, if you find someone who is likeminded, caring, and diligent, business will continue without issue. After all, your clients have the same basic needs with or without you.
In the next post, we will review an article from the Harvard Business Review that’s all about managing the succession crisis.
Tune back in on Wednesday or click through to the next post to find out more.