You well know that running a successful business is more than just meeting the requirements of the moment and the coming year. You have to plan for its long term success. This includes passing or selling your business to an appropriate individual when you are gone.
The average age of business owners increases year after year, approaching the traditional age of retirement. From the demographics, we could have expected a wave of business selling, but merger-and-acquisition activity has remained relatively flat for years. Surveys still find the overwhelming majority of business owners do not have succession plan (and aren’t taking the steps to create one). Why? Most business owners reaching the retirement age are fit, alert and financially better off staying in their business than selling them . Many find their work so personally fulfilling they wouldn’t want to leave it anyway. That’s especially true if the business may be adjusted to better accommodate their later years’ lifestyle preferences.
So while succession planning may remain relevant for family businesses that wish to pursue such a strategy and are prepared to execute it, most business owners need support for exit and continuity planning, not succession planning.
A 2006 white paper by professors from Stanford, Insead and Columbia suggests that in the year after an emergency succession, companies suffer an 18 per cent decline in operating profitability, as well as seeing hits to asset growth and sales growth. In some cases, where an autocratic leader has held the company together, using fair means or foul, his or her departure can precipitate corporate collapse – the extreme case in point being his/her death. The death of Total’s chief executive Christophe de Margerie in a plane crash Monday 21/10/2014, despite having in place a succession plan, plunged the French oil group into an emotional, logistical and governance nightmare. Even if you have in place a succession plan when sudden deaths occur at the C positions level you will realize that you are badly prepared for this type of emergency.
75% of S&P 500 companies surveyed in 2011 had succession plans in place, only 83 per cent of those had as part of the plan an emergency succession section.
If you are like most of the business owners that do not wish to retire soon you still need to ask yourself one of the most important questions when developing your business continuity and /or emergency disaster recovery plan , “Who takes over if you’re not available?”
Business continuity planning is defined as a professional, written plan designed to build on top of an existing business and to seamlessly transition ownership and leadership
Business continuity planning is a unique area of expertise, so successful business owners do not always fully understand what should be done about it. You should appreciate that:
You should not hesitate to work with experienced advisors in business continuity planning. Doing so ensures that your transition out of the business, due to a sudden death or as planned, will go smoothly and that it will be for the benefit of the business, your clients, your family and yourself. James Joyce says: “I am tomorrow, or some future day, what I establish today. I am today what I established yesterday or some previous day.”
Business continuity is not episodic. It should be treated as a continuous practice whereby you and your team are prepared for transitions at any time, and at multiple levels. This should include ownership, C-suite positions and other critical positions. A good business continuity plan should address your death, disability or retirement of the business, as well as the sale of your interests. Further, a great plan will ensure that all objectives are accomplished — that the most effective business transfer is realised, and that funds will be available to provide maximum financial flexibility
With adequate planning, your establishment can outlive you tomorrow, take the Sellability Score Test now! To find out what you would need to tweak to transfer your business when you’re ready. It will simply be the result of what you manage to establish today.
If you have a question or disagree with me please leave a comment on this blog. I will respond promptly so we can have a fruitful discussion
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If you would want to know more on how to transition out of your business and would want to explore what you should do please do not hesitate to call Jean-Bertrand de Lartigue on +44 1656 766 363 or e- mail him at JB@macint.co.uk or visit our website www.exit-planning.co.uk