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February 2010
Succession Planning - Where do I begin?
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 By Robert M. Nemeth, CPA/ABV, CVA, CDFA, CFE
Principal, Succession Planning Team Leader
As with any important job to be done, beginning with a plan of action is half the battle. Developing a sound succession plan is no exception. The work done at the beginning of the process will pay off down the road when a transition takes place.
Last month we were introduced to Jim and Steve, 50/50 partners at JS Widget Company. Jim learned the benefits of proper business succession planning and was excited to begin planning for his desired future. Let’s continue the story………
Jim returned to his succession planner’s office early Monday morning with his thoughts racing in a thousand directions. Should I sell? Will my kids want to take over the business? How will Steve buy me out and keep enough money in the Company to continue to grow? Will my long-time customer contacts work with Steve? What if a competitor finds out that I want to leave the business? What if my employees find out? Will they leave? Where did I file those non-competes?
The questions were endless and a bit frightening. No doubt this is why he had procrastinated in creating a succession plan sooner. But no matter, this time Jim was confident that creating a well defined plan was the solution.
Jim met with his succession planner and learned how they together would make this a streamlined process to ensure that all key issues were considered and a proper plan was developed. Jim learned the importance of having a proper business valuation prepared so that he had a realistic view of the value of the Company. No more back of the napkin calculations!
As part of the meeting Jim and his succession planner talked at length about his personal goals and his business goals. They got down to specifics such as years until ownership transfer, desired income at retirement and key management to develop and train. As they worked through the discussion, the succession planner helped Jim rank the goals in order of importance. This exercise enabled Jim to focus on what was truly important to him and set aside less important goals for the time being.
When Jim left the meeting, he was tired, but relaxed and confident that his succession planner would turn his goals into actionable recommendations. At last, he had taken the first steps needed to create his succession plan.
As we saw with Jim’s case, understanding your Company’s true value and clearly defining both your personal and business goals create the foundation for your succession plan.
Next month, we will take a look at Jim’s next big question. Who will be able to run the Company?
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