April 24, 2014- ISSN# 1545-2646
Perpetuation planning is vital
As business leaders, not only do we need to lead the business on the strategies to run the daily operations but we must also plan the future. Not next week, month or even year but the future of the business beyond your material participation.
For those leaders in larger entities, it is about replacing yourself with talent to continue the vision and culture of the business. Your retirement and pension plans are generally in place and your focus can be on the business of timing your transition around defined cycles in the businesses development pattern.
For those in smaller and medium sized, tightly held and private companies it is about not just transitioning the business to future leaders but also about positioning the business to pay out the acquisition to your portfolio as the business is a key and critical asset to your future.
In smaller businesses there is also the emotional dynamics of turning over the business to future leaders which is significantly different from larger businesses. In large businesses, leadership transfer is still filled with highs and lows, challenges and achievements, but as the size of the entity grew the personal attachment also began to expand and to some degree started to dilute the emotional impact earlier than in small business.
The small business owner and more specifically the early first and second generation owners must attempt to unplug from an environment which has taken on and embraced their own personal values. It has been referenced that many times the business is like the first child. It was in place before real children became part of the family business and now the owner is transitioning away as opposed to the child leaving the nest.
Many planning efforts are good with addressing the technical aspects of this transition period. They define steps of grooming upcoming talent. They define financial instruments to cover key resources. They spell out payment terms and financial aspects of the transition. Unfortunately most stop short of dealing with what the owner really needs and that is the emotional transition plan.
This week you may ask yourself about this whole concept of perpetuation and think it is years in the future. I would challenge that thought. Too often I’m contact by owners asking for help in succession planning. After a brief discussion, they tend to be in the later stages of the business, in their middle 60’s and now ready to start a transition. It may or may not include family or potential suitors to run or purchase the business. The reality is that in many cases the plan is more of a reaction than a strategy.
To perpetuate your business you need ample time to set up key strategies and then deploy the tactics to realize the plan. There is no doubt the plan will be tweaked by events in the business and the lives of those involved in the plan but with out a clear and clean approach, the transition will not only be rocky but the value of a primary asset will be diminished.
Want to have an initial discussion about your perpetuation of your business? Give JKL Associates a call at (313) 527-7945.
Questions or comments – email us at partners@jklassociates.com or call our Office at (313) 527-7945
Copyright – JKL Associates 2014
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