Weekly Thoughts: February 12, 2018
" Succession is not a slam dunk "
Succession planning is a difficult process. To sell or gift, or buy or finance the transfer of the company can take years to complete. Most ‚Äúsecond generation buyers do not have the type of finances needed to outright purchase the company and most senior generation members do not have the finances to just give the business away.  Part of succession planning can include a process of generating new income to assist the next generation in accumulating the purchase price and to fund the senior generations retirement. A wide variety of family and business issues MUST be discussed and agreed upon in order to have a succession plan that works. Issues including:
             *Dealing with disgruntled shareholders
             *Establishing a decision making process with all generations and siblings
             *Establishing duties and job descriptions
             *Establishing compensation/incentive plan
             *Developing of sufficient financial knowledge concerning cash flow, inventory etc.
             *Establishing Family Business Meetings
             *Defining Family Member
             *How family members enter and leave the business
             *Establishing a family code of conduct
             *How the company is going to be purchased etc.
These issues and many more have to be addressed and resolved as part of the succession planning process. Many experts state that it takes, at least, 5 to 10 years to complete a good succession plan. Many of the agreements and documents that govern how the transition will take place can be completed first, but the actual transition can take years to finalize. It is not a slam dunk.
When is the right time to begin family business succession planning? When you have next generation individuals working in the business who are growing in it is a good time to begin. Also when you have no family successors and would like to build your own buyer is a good time to plan. Or even when fatigue sets in and you are tired of working so hard but want to discover a way to maintain the business income. Another reason to check out succession planning is when you want to just look at what options are available to you.

It is always better to have opportunity to work on the governance process while you are alive. With you there you can teach, train and pass on experiences that can save the next generation time, money and heartache, if properly done. Too many senior generation individuals have waited too long to begin the process. Because of this they have lost potential leaders who became discouraged and tired of waiting. When the process is not in place and the senior generation passes away, disruption, chaos, taxes and even family in-fighting contribute to the 2/3 rds of family businesses that do not make it through the second generation.
Succession Planning is serious work. Work that takes time, commitment and a whole lot of patience and demonstrated love for one another in the family. When begin early enough it can secure futures, head-off family disputes and create a generational family business.

So what are you waiting for? Planning 5 or 10 yearss out is not too early. Succession planning is not a slam dunk.
Kwaiserism: "Thinking succession planning is easy, is the beginning to failure"
View our book "Transforming Family businesses" by reading the first chapter on our web site  www.kwaiser.com .

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