Succession Planning is Key to Sustaining Your Business

MCC Construction Zone

Succession Planning is Key to Sustaining Your Business

Martin C. McCarthy, CPA, CCIFP

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uccession planningis the key to sustaining your business into the future. Contractors need to address who will take over the business when they retire or mustleave the company due to circumstancesthat are beyond their control.

Succession planning isa process and strategy for replacement planning or passing on leadership roles. It is used to identify and develop new, potential leaders who can move into leadership roles when they become vacant.Having a succession plan in place will ensure that the owner’s wishes are carried out and prevent a power struggle within the organization. (Wikipedia)

Identifying the Next Leader A successionplan should clearly identify the capabilities, roles, and talent needed to lead the company. It is important to match any potential candidates’ temperament and skill set to the job. Money and resources will be invested in grooming the successor. Making sure the right person is selected for the job is critical.

Family-owned businesses may want to transition leadership to the next generation. Unfortunately, a family member(s) might not possess the right skills to take over the company or more importantly

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in some cases, even be interested in the business. If a relative is not qualified for the position, they should not be considered‒that would be a critical mistake. Other options include aperson inside of the company or, if the right talent is not in-house, hire someone who has the experience and potential to run the company or, alternatively,look for a merger partner.

Preparing for the Transition of Leadership Strategic companies identify talented and capable leaders five to ten years before they are needed to serve. It could take this long to prepare the right person for the job. A development program is recommended to ensure that the successor is ready when the time comes. This could include: • Leadership training • On-the-job training • Mentoring/ Shadowing • Coaching • Relationship transition planning

It is also advisable to have the new leader in place at least one year before the owner leaves the company to ensure that the successor can accurately assessthe duties and responsibilities, which will helpthe success of the transition. This is especially important when transferring critical business relationships.

Other Considerations Owners should discuss with each other and key employees their expectations, vision for the company, and the intent of the transition plan. Succession planning requires leadership to be openminded and honest about the possible impact on: • Family relationships and finances • The company’s culture • Employee retention • Client relationships

Everyone involved should have the opportunity to voice their opinions and concerns and decidewhetherto the support the plan. Buy-in is critical to the success of a succession plan.

About the Author Marty McCarthy, CPA, CCIFP, is the managing partner of McCarthy & Company. He is well respected by sureties and bankers for the high quality of his work and profound understanding of the construction industry. Marty helps clients by providing them with theinsight needed to grow their business. He can be contacted at 610.828.1900 or Marty.McCarthy@McCarthy.CPA.

A version of this article was originallyin Construction Executive published by the Associated Builders and Contractors Association (ABC).

Marty McCarthy, CPA, CCIFP

Disclaimer: This article is for informational purposes only and does not constitute professional advice. We strongly advise you to seek professional assistance with respect to your specific issue(s).