Ready to Talk

Attention Small & Emerging Business Leaders: Who wants to talk succession planning? Seriously.

Chris Pratt, CBC, Vice President, HORAN Emerging Business Advisors

What a headline grabber, am I right? Okay, I'm somewhat joking. I realize succession planning does not constitute the highest form of stimulating subject matter, but this is not a topic to be dismissed or tabled for another day. Ask anyone who has worked with or for privately-held or family businesses for any extended period and they can point to cautionary tales of companies left scrambling after the unexpected loss of persons imperative to those operations. Examples of loss comes in many forms. Consider death, disability or the exodus of irreplaceable talent. In most circumstances, “scrambling” only happens in the absence of appropriate planning. As our 35th U.S. President, John F. Kennedy, declared in his 1962 State of the Union Address, “The time to repair the roof is when the sun is shining.” In other words, do not wait until crisis strikes to fix a known vulnerability. If you are looking for me to provide supporting data, here goes nothing. A recent article in Kiplinger stated:

“Only 30% of family-owned businesses survive the second generation. Many of these failures result from a lack of succession planning.”*

A staggering figure if you ask me. Especially, when you consider the fact that succession planning is not a new or novel concept. At a recent HORAN GROW Series event, our own Michael Napier, CFP®, Vice President, Wealth Advisor, Registered Representative, at HORAN, provided some critical takeaways regarding people risk management and succession planning:

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Many key employees need an exit strategy including top management, sales and chief operating roles—not just the owner/CEO.

The first steps to creating a succession plan include starting the conversation early with your corporate accountant, attorney or other advisors; identifying successors; and funding the buy-out strategy.

Key-person life and disability insurance is the best way to protect your business from the financial risk of losing a top employee; these policies can be purchased relatively inexpensively in comparison to the value they bring to the organization.

It is common for employers to retain key talent by providing stock option or deferred compensation plans. But also make sure to put a non-compete or solicitation agreement in place to mitigate the risk should that person decide to move on.

If your business does not have an appropriate succession plan in place, I have some good news to share. You still have time, but your time is now. If you are not going to listen to me, I ask that you listen to former President John F. Kennedy. Now go fix your roof while the sun is out.