Succession Planning The Sooner, The Better
Running a business leaves little time to think, let alone plan for retirement. We’ve certainly seen this to be the case with CGNA members, who are busier than ever growing their companies and serving their customers. Many business owners simply don’t have the will or the bandwidth to develop a plan for passing the leadership reins. But when it comes to succession planning, there is no time like the present.
Succession planning refers to creating and implementing a strategy for passing on leadership roles, often including company ownership, to the next generation who will be responsible for the business’s continued success. Having a plan in place helps ensure a smooth transition to new leadership or ownership. It also provides valued employees peace of mind and security, knowing that the company they work for will be in the right hands.
For Dennis Floro, a long-time business consultant, securing a future for employees is one of the most compelling reasons to have a succession plan. “I recently advised a business owner who told me he doesn’t have a responsibility to his staff, but a responsibility to his people, whom he considers his family,” Dennis explains. “That says it all in a nutshell. As a business owner, you want to make sure your company is still around and thriving for the people who helped make your business what it is today.”
Planning for the future is just as critical for owners who intend to sell their companies rather than pass leadership on to a current employee or relative. “The owner with the best plan in place, with thorough and solid numbers, will win the day when it comes to negotiating a sale,” advises Dennis. “So not only are you protecting your legacy as a business owner, you are protecting your bottom line.”
While succession planning is one of the most critical steps a business can take, many owners tend to put it off for a variety of reasons. More than a few don’t think about it until it’s too late.
“As human beings, we tend to think that the unexpected will never happen to us,” explains Dennis. “Owners are busy running day-to-day operations. Their mindset is, ‘When and if something happens, I’ll take care of it then.”
Dennis advises his own clients as well as CGNA members to start planning their strategies sooner rather than later. “Many owners haven’t confronted the importance of succession planning before an event or crisis happens. I tell them to plan now, while they’re still in control and can call the shots,” he says. “Others just haven’t accepted the commitment it takes to develop a succession plan and all that entails.”
Despite the lack of time and hesitations, Dennis adds that he’s heard from a growing number of CGNA members who increasingly understand the importance of leadership transition. “For these business owners, one of the main barriers is simply not knowing where to begin,” says Dennis. “They know they need a plan, and are willing to invest the time to create one. But they have no idea how to go about doing it.”
Dennis recommends beginning the planning process early, and approaching it incrementally. In the next newsletter issue, we’ll delve into the steps business owners can take to make sense of succession planning and how to get started. Stay tuned.