Don’t die before you pass your business’ torch. Here is how to plan the handoff.
As baby boomers enter retirement years in droves, the question of who will succeed them in their businesses is an ongoing issue. While some can’t wait to leave their careers to start doing all those things they have been postponing until retirement, others will “die with their boots on” without plans for their business’ future.
Not having a plan is a poor plan
Leaving succession planning to the NextGen is the poorest, though most common, plan. As the saying goes, “No one gets out alive,” so at some point the issue of succession will arise, both from clients/customers and from employees.
To whom do you want to pass your torch? Will it be another family member, or an “outsider”? This is one of the most fundamental questions. In either case, you need to start the planning process years in advance. Family businesses are, in many cases, built on long-term relationships that may span generations. Transferring these relationships to the NextGen needs to begin sooner rather than later.
Building a succession team is as important as building your business, and your clients/customers are as concerned about your business continuity as you are. They want the great service or product you have helped develop to continue.
The first thing to do is outline your succession plan: do you have an internal successor identified? Will that person (or team of people) be able to replace all the things you do now, or will you need to look outside the company?
Effective succession planning can help alleviate issues associated with “Founders Syndrome” that may hinder both the growth of the company and the ability to foster the NextGen’s ability to take the leadership reins.
If you have a leadership position (CEO, COO, etc.), your goal should be not to die with the torch, but to pass the torch to the NextGen and help lead them down the path to a successful transition.
After the plan is initiated
Once you have begun to pass the torch and the recipient(s) begin to take over control, your new role may become more difficult. Doing it ‘your way’ should not necessarily be your aim. Empowering the NextGen to take leadership and responsibility is your job, not creating a “mini-me.”
This can be difficult at the beginning, but as you begin to let go, hopefully you will find the process exciting and rewarding as you watch your mentees grow and develop.
Giving up the cash flow and staying relevant in life after you leave your career is a common fear we hear from people as they head into their retirement years. Depending on your position, a phase-out of duties may be possible (though not always wise).
Your decades of experience, knowledge, and contacts could be useful to your successor, or it may get in the way of their success. There is no single “right way” to create a successful succession plan. Spending time considering your options and putting steps in place early will help in the long-run.
Imagine what your business would look like if you were suddenly taken out of the picture. Do you want to burden your heirs with all the decisions, or do you want to comfort them in the knowledge that you provided for a documented and smooth transition of your business? Not having a plan is a poor plan!
An experienced adviser, your financial planning professional, or your accountant, can help you explore the options and timing of a succession. Since the process can take several years, it is best to start sooner rather than later.
CFP®, CEO & Managing Partner, Senior Wealth Advisor