Many business people spent all of their productive years building their businesses from scratch, hoping that one day, they could pass them on to their next generation. Most often than not, when the businesses become successful, many business owners are clueless as to how to pass the baton to their successors!
Quoted here are a few common scenarios which could give rise to complications, in the absence of a proper Business Succession Planning :
#1 The candidates are too young;
#2 Grown-up children are not interested in the business
#3 The children are residing in different countries
#4 Afraid of squandering heirs
#5 Unable to identify a successor
#6 High potential of further fragmentation of shareholdings when it goes to the cousins (children of current shareholders), in a family business set-up.
#7 Do not have any Shareholders Agreement, Corporate Will or Buy-Sell Agreement.
I trust that the best time to plan is when everyone is happy, and the sea is warm and calm. This is THE time to discuss details and reach a consensus. Once the plan is set in force, the next course of actions would be to monitor and having periodical reviews to keep the succession plan relevant as years go by.
When you are busy building your empire, remember also to allocate some time to make plans for the future of the business and YOU. I’m sure, you would want to retire one day and having an exit strategy will ensure that you could do so when the time comes.
There is no right or wrong timing when it comes to initiating a Business Succession Planning. Like the famous saying goes, “Don’t fail to plan or you’ll plan to fail”. If you do not have a plan in place, when there is a dispute, the law may step in to decide on an action plan for you. The final decision may seem to be equitable but may not be fair to all concerned.
I believe that no one, in their right frame if mind, would want to see the fruit of their hard labour turned into something of a court fight one day. By then, the harmony of a good relationship amongst the shareholders and families will be destroyed, replaced by feelings of hostility and resentment.
Having said that, it is most vital to put your Business Succession Planning into your “Actions Required” list. Then you’ll have peace of mind to focus on running your business and mentoring the identified successors. Wouldn’t that be a preferable exit for you and all concerned?