Business Succession Is The Only Success For Successful Businesses
Decades of statistics illustrate that most successful businesses ultimately fail
. In fact only 35% of successful family businesses (and virtually all small businesses are family owned) survive through the second generation, and of those only 20% survive through the third.
The reasons are typically straightforward and the excuses have been the same, from my personal experience, for over a quarter of a century. How do I define failure when taking about these successful businesses? Why do I say these business fail? Well what are the options available to a successful business owner when the founder or senior generation of owners come to the end of their careers?
The business can be sold, or can it, as a going concern - but that rarely works out since the owners have to trust in the buyer's ability to run the place successfully enough to pay their own salaries and still have enough left over to pay the note. Ask your accountant to illustrate this for you.
Or the company can be broken up and sold for the value of its assets. That's unlikely to be satisfactory, certainly not to the employees who lose their jobs - and the depreciated value of the businesses assets are unlikely be to large enough to provide the stream of income required for the retiring generation let alone having anything left for their heirs. That's pretty pitiful results for a lifetime of work, huh?
That leaves the only real possibility - the continuous operation of the company in the hands of the next generation through a process of succession that does not require a sale or other taxable event that diminishes the assets and the resulting income stream from the business.
Business owners who have put in twenty or more years building their companies know that succession is their only hope. They have all seen folks try the clever strategies to do otherwise and then ended up with very little to show for their life's work. So why do these otherwise successful business owners fail to take the steps necessary to insure that succession happens?
Business advisors know that a seamless succession process is the only way their client can exit the company satisfactorily but can't seem to get their message across to them. Family business succession planning is the systematic process of ownership transition, and it is no simple task.
Maybe that's the problem, it's too complicated for business owners to understand? But if you have been around a while you know that business succession planning is not a one-shot event, it requires everyone's commitment to review and revise. What, did you get bored thinking you could sign a paper and keep on with business as usual?
Needless to say, family business succession planning can bring about peace of mind and it also protects unprepared family members from decisions connected with owning, selling and managing the family business - so what's the problem, why don't you do anything about it before the good options are taken away from you? Family business advisors often fail to serve them either because they refuse to acknowledge the most productive role they can play, providing the tools and tactics available to help make the business owner's dreams come true often by failing to communicate effectively with other members of their client's advisory team.
Too often, estate and business succession planning is done with an eye toward the tax and financial aspects only, ignoring the very important impact of family dynamics - maybe because nobody asked the business owner specifically what he or she wanted to happen. This invariably leads to plans that collapse since the unspoken desires of family members will serve to undermine not only the tax and financial objectives but also may destroy the family harmony.
Why don't advisors address the emotional issues that are keys to moving forward with transition planning instead of simply concentrating on the legal issues, tax issues, insurance issues, and management issues? Does anyone ask the business owner their opinion, what's possible given the abilities of the members of the next generation? Maybe if their advisors would ask and then listen to the dreams and goals of the business owners and their families they could create plans that everyone will buy into?
Whether you are the family business owner or the professional advisor, you can blame whoever you want but that won't change the fact that it is your responsibility. Will the future be the time you'll be happy with the decisions you make today, or not?
Who's in charge of your business succession process? Who is going to have to live with the outcome? You know the answer, now it's time for you to do something about it.
Perhaps a virtual, over an Internet conference system, business mastermind group will help you harness the insights of your peers. The experiences of people you trust who have already been through the succession planning process will prove invaluable.
by: Wayne Messick
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