Procastination: The Bane of Succession Planning

Procastination: The Bane of Succession Planning

By Jim Zipursky

August 27, 2008

Recently, Fortune Small Business magazine conducted a survey of owners of privately-held, small & mid-sized businesses in the USA. Two questions were asked:

  • How critical to your business’ survival is succession planning?
  • Have you done anything about formalizing a succession plan?

The results were extremely interesting. More than 95% of the respondents said a succession plan was critical to the long-term survival of their business, but a staggering 85% had not done anything to formalize their succession plans.

This survey reinforces information we learned first-hand several years ago when leading a continuing education course for Certified Financial Planners (CFPs). The subject of the course was “Succession Planning for Business Owners.” With more than 200 CFPs in attendance, we asked how many of their business-owner clients had formalized their succession plans. Less than 5% of those in attendance had clients who had formalized their succession plans. More startling, the CFPs in attendance reported less than 20% of their business-owner clients had even discussed their goals for succession, let alone put these goals in writing.

We all know the old saw, “A failure to plan is a plan for failure.” We also know most people do not like to face their own mortality (why is it people say, “If I die” and “When I win the lottery,” isn’t this fractured logic?). The reality is, every business will change hands at some time…it is inevitable.

Everyday, the Wall Street Journal and the business section of your local newspaper are filled with stories of Private Equity Groups (PEGs) acquiring…and selling…businesses like yours. Interestingly enough, PEGs never make an acquisition without defining their exit options…before they make their investment!

Take a tip from PEGs, professional business acquirers, and plan for your own exit from your company. As a business owner, you owe it to yourself, your shareholders, your employees, your customers/clients and your suppliers, to start examining your exit options. If you are not proactive about this process, the process will control you…and you just might not like the results.