Succession planning is a huge multi-year process. Even at the small business level there is a number of ‘players’ involved:
- The insurance agent looks at the insurance need. They think more insurance is better.
- The banker wants security from everyone involved – the retiring shareholders and the new level of leadership.
- The income tax advisor has a plan that will reduce your estate taxes. It’s really complicated and hard to understand. It may not even survive an audit but they think you should try it.
- The lawyers’ job is to take a pessimistic look at the deal. You will need at least one lawyer for every new and old shareholder because they all need independent legal advice.
- The investment advisor will invest your life savings and provide you a happy retirement. As he does this, he will be funding his own retirement plan too.
- The children involved in the business will hopefully get along with each other. The children that aren’t involved in the business will still contribute their advice at times.
- Your spouse just wants the deal to be fair and the family to stay together. They have lived through the ups and downs of small business ownership and are totally ready to move on.
Before we talk about the last but not least player, the actual business owner, can you see how all these players want to take the deal in different and conflicting directions? It would be like a football team without a quarterback.
The succession plan needs a quarterback. If you have a proactive accountant who is responsible and trustworthy, they will be a good quarterback. Every one out of one hundred lawyers has the potential to be a good quarterback too. Maybe you are comfortable ‘quarterbacking’ the plan yourself.
Since you, the business owner, built this business – you get to decide the succession plan playbook. Since you won’t keep everybody happy anyway, why not make a plan that works best for you and everyone else will adapt? The best advice I can give is to be as clear as possible in communicating your intentions with each player.
As a business advisor, I have worked with all the different types of players in succession planning. I have even been around long enough to work on a succession plan for a family that I did the succession plan for the previous generation!