I recently suffered the sudden loss of my father, who fell ill following a brief battle with pneumonia. After the grief and recovery from the initial shock of the loss, I had to begin the daunting task of filtering through his financial affairs, which was quite complicated.
More than personal expenses, the one issue that my father omitted from his Will was a clear succession plan for his business. It took nearly 25 years to build, and his sudden passing to lose sight of the plans and forecasts he had for the company. As a result, there is a gray-area, where he discussed who should take over the company, but never memorialized it for full clarification.
I believe that we are all optimistic about life and the success of our businesses, such that we negate the importance of effective succession planning. Whether you are a thinking of starting a business, a sole-practitioner, start up or the founder of a successful company; succession planning is necessary, but often overlooked.
There is no joy in thinking about illness or death, but unexpected life events can cause a negative domino effect within the formative years of a company. My fathers' passing gave me a real wake up call about the reason I built my company and the importance of creating a 100-year plan to carry on my life's work, legacy and contributions.
Here are five reasons you need to get serious about creating your strategic succession plan that will continue to create a generational impact and carry on your legacy.
Choosing your successor will take time.
This is not an emotional choice, it is a leadership decision based on the characteristics of the person, or team, who can carry on the baton to further your investment in the company. Think outside of friends and family, if needed, and appoint the best leader with the approval of your advisory team.
Seek the advice of your financial planner and attorney .
As participating members of your advisory board, they will have a crucial role during the planning phase to advise you of the best choices based on the current and future value of the company. Make sure your board approves your successor(s) by unanimous vote and set the terms in the bylaws of the company for all of the members of your team/staff to create a smooth transition.
Your legacy depends on it .
What if you become ill or pass away? How will your legacy be memorialized? The job of a great leader is to identify and mentor their successor(s) who will continue to move the company forward. Remember, there is more at risk than just your business, it is also your legacy.
Generational wealth and directives .
"Business owners who don't have a succession plan are putting a lot at risk if they hope to someday cash out at a fair price and/or ensure that their companies survive them," according to an article by CNBC. A succession plan will provide a clear agenda and create generational directives and bylaws for future successors of the business. Your business should not dissolve once you are no longer present.
Memorialize your hard work.
Building and scaling a successful business requires an immeasurable level of sacrifice. Do not devalue your own sacrifices because you refuse to think of the long-term value of your company.
My father always thought 20 years ahead, but did not plan for 20 years ahead for his company. "While succession planning is a challenging task, it is worth the reward of watching your business grow and succeed in the next generation," according to SCORE, a resource partner of the Small Business Administration.