Business owners who do not form a succession plan create a time bomb that can not only destroy their companies but tear apart their families. Time is catching up on many owners of label companies and they are forced to think about exit strategies. Here are some suggestions to avoid a succession disaster:
IDENTIFY YOUR SUCCESSORS Deciding which child or relative will sit in the corner office is often so emotional that it can stop succession planning before it starts. But it is the necessary first step. Don’t assume the next generation has the same skills.
Some succession specialists advise business owners who can afford it to put their possible successors through rigorous outside analysis. The advantage to creating a scientific and merit-based process is that it not only finds the best job for each member of the next generation, it takes the emphasis off family politics like birth order and gender.
Also, the future of your business will be best assured if you have choices...and good ones at that. It is not just big companies that need independent board members, small ones do too, so that they can gain a different perspective and subject the owner to a reality check once in a while.
If there are no family members or employees who are willing and able to take over the business, a sale may be the best option. Certainly, inheritance will be made much easier that way. To maximize profits proper planning and preparation is crucial to get your company ready for a sale.
PREPARE THE NEW BOSS If a child or other relative expresses interest in taking over the family business, the owner should set up a formal system of hurdles to make sure the child gets the skills required of any other prospective manager.
One way is to send your kids to work somewhere else for some time until they get a raise and promotion. It gives them self-respect and brings fresh blood and ideas into the family business. It also mirrors the spirit of many label companies that you have to earn your way in. There‘s not much value if you’re simply gifted something.
When the owner(s) has finally decided who will get the company’s reins, it can also avoid sibling power struggles by not passing on shares — especially voting ones — to children and other heirs who will not be directly involved in the business. Instead, they should receive other assets, retirement accounts or life insurance.
DEAL WITH CRUCIAL EMPLOYEES Often there is no family member who is interested in and capable of taking over the business. And even if there is one, tensions can drive out important nonfamily employees who feel overlooked. To ensure that a new leader does not lose top lieutenants, it can be smart to offer them a piece of the pie.
COVER YOUR TAX EXPOSURE A lot can be gained by proper tax planning as a crucial step of succession planning. As tax rules vary by country, make sure you take the proper advice to avoid a tax hit and keep the business in the hands of the people you prefer.
IDENTIFY YOUR SUCCESSORS Deciding which child or relative will sit in the corner office is often so emotional that it can stop succession planning before it starts. But it is the necessary first step. Don’t assume the next generation has the same skills.
Some succession specialists advise business owners who can afford it to put their possible successors through rigorous outside analysis. The advantage to creating a scientific and merit-based process is that it not only finds the best job for each member of the next generation, it takes the emphasis off family politics like birth order and gender.
Also, the future of your business will be best assured if you have choices...and good ones at that. It is not just big companies that need independent board members, small ones do too, so that they can gain a different perspective and subject the owner to a reality check once in a while.
If there are no family members or employees who are willing and able to take over the business, a sale may be the best option. Certainly, inheritance will be made much easier that way. To maximize profits proper planning and preparation is crucial to get your company ready for a sale.
PREPARE THE NEW BOSS If a child or other relative expresses interest in taking over the family business, the owner should set up a formal system of hurdles to make sure the child gets the skills required of any other prospective manager.
One way is to send your kids to work somewhere else for some time until they get a raise and promotion. It gives them self-respect and brings fresh blood and ideas into the family business. It also mirrors the spirit of many label companies that you have to earn your way in. There‘s not much value if you’re simply gifted something.
When the owner(s) has finally decided who will get the company’s reins, it can also avoid sibling power struggles by not passing on shares — especially voting ones — to children and other heirs who will not be directly involved in the business. Instead, they should receive other assets, retirement accounts or life insurance.
DEAL WITH CRUCIAL EMPLOYEES Often there is no family member who is interested in and capable of taking over the business. And even if there is one, tensions can drive out important nonfamily employees who feel overlooked. To ensure that a new leader does not lose top lieutenants, it can be smart to offer them a piece of the pie.
COVER YOUR TAX EXPOSURE A lot can be gained by proper tax planning as a crucial step of succession planning. As tax rules vary by country, make sure you take the proper advice to avoid a tax hit and keep the business in the hands of the people you prefer.
