While we may not want to acknowledge it, the day will come when we'll leave our kitchen and bath firm, and the business will have to deal with our departure. How this event plays out will depend largely upon the adequacy of advance planning.
To plan for the future, it's important to evaluate the current status of your business, planned and unplanned departures, and the plan itself.
The first decision you need to make is what you want to happen when you leave your business. In many cases, the business is small, and consists of the owner and immediate family. In this situation, the long-range plan probably involves closing the business when it's no longer needed to provide an income for the owners.'
Businesses such as this will have little chance of survival without the owner, who usually is a "one-person show," accounting for most of the key functions of the business. In this case, little is needed in the way of a succession plan. What is needed here is simply a liquidation plan.'
Often, however, you, as the business owner, have set your sights on building a business that will have a life beyond your own involvement in its day-to-day operations. If this is the case, you need to bring together a group of people who are able to accept responsibility for the various aspects of your business.
If these individuals are partners or family members, their presence can imply a succession plan. However, if there are several partners and/or family members, your departure could lead to a fight for control, which translates to turmoil for your business and its employees. Likewise, if there's no obvious successor, an unplanned departure will likely result in a paralysis of the remaining organization.
In any case, as a business owner approaches retirement age, it's not unusual for others in the organization to be concerned about what will happen to the business (and to them) when the owner is no longer there to lead. At some point, the level of uncertainty can cause some of your best employees to look for opportunities where their own futures seem less in doubt.
Ready or not
Whether you're planning a succession or a liquidation for your business, you probably think of it in terms of a gradual process that you will orchestrate. You believe the process will leave you financially secure, and your business will either hum along without you or be carefully tied up, with all of your clients and creditors happy.
All too often, however, we're not around to see this happy outcome. When our departure from our business is unplanned, someone else will have to take over in our place and carry out the transition in our business. It is this situation that makes advance planning so important.
As previously stated, if you have no plan for your business to continue, your plan can be fairly simple; it should indicate how projects are to be completed and creditors satisfied. This is often handled with a will and some life insurance. If you plan to have your business continue, however, you should be making changes and plans immediately to make sure that it will happen.
Your succession plan should have three elements: organizational, financial and ownership.'
For the business to carry on without the primary decision maker, it's important that the organization be developed to allow delegation of various responsibilities. There are also some organizational steps that will assist you in turning over some of these tasks to other members of the staff. The first is to develop a mission statement for your business that will serve as a compass for everyone in guiding their decisions and actions. In addition, form a management team of your senior people, and give them meaningful roles in determining the direction of your business.
If there are partners or family members, make them a part of this management team. It will be necessary to share all aspects of the business and its workings with your management team if the team is to participate in a meaningful way with its management. The management team that you assemble should logically be responsible for the functional areas of the business (sales, finance/accounting, operations, etc).
You need to develop and discuss plans for your eventual exit with this group. It's important that your management group be aware of the company's current financial situation and any changes that will occur in case of an "untimely" exit on your part such as life insurance proceeds to the business or requirements for buyouts for surviving spouses or partners.'
Your actual plan should have two alternative paths. The first will allow you to leave the business for semi-retirement or retirement. It may or may not anticipate continued ownership and involvement by you or your family. It might also anticipate a sale or merger of the business to partners, other family members or employees. In any of these cases, the business' value will only be enhanced by its ability to function as a stand alone, without being dependent on any one individual.
The alternative plan should anticipate a sudden departure on your part. This element of the plan needs to identify who will be "in charge" during a transition. Again, if there are partners, this may already be spelled out in the form of buy/sell agreements among the partners. The plan needs to indicate what role your spouse will play in the event you should die or become incapacitated.
Finally, it's important that these plans be recorded in writing, and that everyone involved in carrying them out be familiar with them. Furthermore, these plans need to be reviewed regularly to make sure that changes in circumstances are taken into account.
While no plan can anticipate all of the possible conditions and
circumstances that your business will face as it moves into the
future, with or without you, having a plan will ensure that thought
has been given to some of these possibilities. Additionally, this
will provide guidance in dealing with whatever is
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