The Top 9 Reasons Why Businesses Fail To Do Succession Planning – Part Two
Sixth, there is a distinct lack of courage among next generation successors, whether they’re family or non-family. It’s almost like they revere the bosses or the senior generation in the company so much that they don’t want to rock the boat. This happens rather frequently, really. They need the courage to go to the boss and say, “We really need to think about what we’re going to look like 10 years from now, because you’re not always going to be here, and you want to take more time off and travel with your spouse and all this other stuff.” How much courage does that really take?
Very few successors have said, “Look, if we’re gonna do this succession planning, I want to know my future, or I’m out,” and actually have the courage to quit. Those few people have courage, and will usually turn out to be the best kind of leaders. I wish more of our next generation successors had the courage to really push, and say, “We need this as an organization.” You’re going to lose your best people if we don’t have a pathway for them to see themselves in the future of this business.
Seventh, the senior generation is worried about fairness. This is a particular problem when a business is being passed to next-generation family members. The majority of small businesses today have both employee family members and non-employee family members, and the senior generation always worries about treating their non-employee children fairly at inheritance time if they don’t have non-business assets to give to the non-employee children. That’s not that hard of a problem. Go out and buy some life insurance or figure out a way to give them all the business equally. There’s so many ways to overcome that, but the sheer idea of it blocks any progress.
The eighth reason is that people view family business succession planning as an event, not a process. Say it’s January, and the business owner says, “Okay, look, I’m tired. I’m 70 years old. I’m gonna be out. December 31st, I’m out. Get ready.” Well, it’s not like you don’t have a busy job as a successor. It’s not like everybody’s not occupied. What do I even need to know to be ready to run the company? So, there’s little mentoring, and little preparation. There’s little time invested and it basically becomes an event. On December 31st, the old owner is out, and the successor is the new president. Now they have to get to it and they don’t know where to even begin, because the old guard were doers, not teachers or mentors.
Ninth, it costs too much. I don’t want to go to my lawyer and CPA and spend thousands, and I don’t want to hire a consultant. It costs a fortune, so we’ll just figure it out on our own. Well, lawyer fees and CPA fees and professional consulting fees are not cheap. But at the same time, if you have a business worth preserving, you have to look at it as an investment with a predictable return. Yes, you’re spending many thousands of dollars. But if you can preserve the value of a business worth 1,000,000 or 5,000,000 or 100,000,000, isn’t that investment really a drop in the bucket?
Those are the top nine reasons that family businesses fail to do succession planning. Due to one or a combination of these reasons, you walk away from it, and put it off for another six months, and think you don’t have to worry about it. If you’re stuck with one or more of these challenges, please pick up the phone and call us at 800-755-0988, we’ll talk you through it, and try to get you pointed in the right direction.