| For many people, succession planning consists of | | | | include (and here we assume, like most small and |
| placing personal property in joint tenancy, | | | | emerging businesses that we have a situation of |
| executing a will, and buying some life insurance. | | | | family involved:What are the retirement goals of |
| These measures taken by themselves may not | | | | the current owners (timing and required financial |
| be very effective for the owner of a closely held | | | | compensation)?Which option makes sense: Sell to |
| business.Many business owners are so focused on | | | | family, sell to an outsider or liquidate?What is a |
| the daily operational concerns of running a | | | | fair market value of the enterprise?What do I do |
| business they do not take the time to plan for | | | | about heirs that do not or will not participate in |
| the transition of their business assets. | | | | the business?Does it make sense to designate |
| Consequently, succession planning is not done, is | | | | heirs a number of years ahead of the transfer?If |
| put off until retirement is imminent, or is rushed | | | | family members are buyers of preference, to |
| into in a crisis.Waiting too long can be a serious | | | | what degree do they get a "break" on buying the |
| problem for the company and/or intended heirs. | | | | company?Have family members received |
| Options could be reduced or no longer available | | | | appropriate and adequate training in management |
| because of bad timing. Failing to provide for an | | | | to take over either as managers or owners?How |
| orderly transition is one of the top reasons for | | | | can a sale be structured for minimum tax |
| bankruptcy in small businesses that were, before | | | | consequences?How do I protect the Succession |
| an unplanned ownership change forced the issue, | | | | Plan in the event of the untimely death of a key |
| operationally successful.There is no specific time in | | | | owner or a preferential heir?Engaging Your |
| the history of a closely held company when | | | | Professional Resources:What is apparent from this |
| succession planning should begin, but the earlier | | | | list is that succession planning is not a casual |
| the question is faced, the better the result. In a | | | | exercise that is engaged in one year before |
| family operation, the Succession Plan can provide | | | | retirement. It requires the formation of a business |
| a firm foundation for orderly transition, provide | | | | "team" consisting of current owner(s), key family |
| confidence in management and relieve owners of | | | | (particularly the likely heirs, if any), your tax |
| a potential burden.The worse strategy for | | | | accountant and your corporate attorney, among |
| succession planning is doing nothing at all. This is | | | | others. If you have a Board of Directors or Board |
| the best way to create havoc and often has | | | | of Advisors they should read on your succession |
| been the demise of an otherwise healthy | | | | plan also. They can provide valuable independent |
| company. In the event of the death of the | | | | experience on key questions that you may have |
| owner(s) without a funded and protected | | | | in this area."Failing to Plan is Planning to Fail." Effie |
| succession plan, chaos ensues, the government is | | | | JonesRobert A. Normand is Executive Director of |
| often the heir of reality and family life is bitterly | | | | the Institute for Small Business Management ( and |
| interrupted. Insurance helps but is certainly not the | | | | author of "Entreprenewal!, The Six Step Recovery |
| whole answer; planning for managerial succession | | | | Program for Small Business" ( Mr. Normand has |
| is still a great question that must be addressed | | | | served as principal management consultant for |
| and answered.The Stages of Company | | | | more than 100 businesses ranging from $500,000 |
| Growth:The process of building a company | | | | to $50,000,000 in annual sales and has owned and |
| proceeds as follows:1) Initial start-up period (also | | | | operated several small businesses of his own in |
| called "Survival")2) Building Value Period3) | | | | diverse industries. Mr. Normand's small business |
| Developing a Self-Sustaining Organization4) | | | | philosophy is premised on the belief that small |
| Providing for an Orderly Transition to New | | | | business management skills can be developed by |
| OwnersCertainly a Succession Plan needs to be in | | | | busy entrepreneurs using readily available |
| place by Stage 4 and would be logical to have by | | | | information, tools and procedures not found in |
| Stage 3 (otherwise it can't be "self-sustaining") but | | | | business schools or formal degree programs. He |
| is definitely preferable to be in place during Stage | | | | can be reached by telephone at 941-330-0889 or |
| 2.Key Succession Planning Questions:The major | | | | by mail at 3751 Almeria Avenue, Suite A4, |
| questions that must be faced in a succession plan | | | | Sarasota, Florida 34239. |