For entrepreneurs, business owners and their families, succession planning is a highly complicated but critical process. As businesses grow and mature, ownership and management dynamics change. In addition, not only do the industries in which these companies operate evolve, but the personal lives of the individuals who have created these enterprises do as well. Typically, succession planning is a topic that is discussed, but rarely prioritized. Most often, business owners have extremely busy lives, and consequently the succession strategy is not planned with significant detail. As a result, as businesses transition from one generation to the next or to new ownership, unexpected challenges arise which may hinder the sale of or the management delegation process for companies.
As an ownership group or entrepreneur begins to consider how to most effectively proceed, they are faced with numerous multi-dimensional questions:
What happens when I want to retire or would like to meaningfully diversify my net worth?
Do I sell the business?
If so, when and how?
Do I seek a financing and operating partner?
What is the right fit?
What are the tax consequences of the sale?
What happens to our family members and employees who have been key drivers for our success?
From the viewpoint of someone who has a diverse background as an investor, advisor and an operator and is also the son of a successful entrepreneur, the most important advice that I can suggest is to plan well in advance of the transition or sale and to seek the counsel of a team of professional advisors. Having an array of perspectives will provide unique insight, help anticipate obstacles and proactively develop creative solutions. This is a delicate process and one that serves as a cornerstone of the business owner’s legacy.
By Gary Lewis