Business succession planning: the next steps Featured

10:56am EDT July 5, 2011
Business succession planning: the next steps

During your lifetime, a succession plan can be as simple as a merger or acquisition, or it can be your retirement from the business. In either scenario, the preparation should be the same. Business succession plans are triggered by your untimely death, or they can be created during your lifetime through well-written strategic and tactical continuation plans and agreements.

Let’s discuss briefly five basic ingredients in a successful transition:

  • Creating and implementing the vision
  • Good planning
  • Effective communication
  • Trust and confidence in your professional partners and advisors (e.g. attorney, CPA, financial advisor, insurance expert, business valuation expert, banker, others) and having the right team in place
  • Maintaining a work-life balance

Let’s begin with Vision

Vision is defined as an image or concept in your imagination. Your vision and your ability to see clearly in the future guide you in the succession planning process. One of the roles the business owner undertakes is that of the Chief Visionary Officer. The clearer that visualization is, the clearer your direction and behavior, regardless of whether your goal is a merger, retirement, or sale of the business interest.

Next, consider some excellent planning considerations.

Because of our mortality, let’s look at it from the worst perspective first: death. So, what is the first thing to do? If you had a magic wand, what would you want to have happen right now?

Let’s start with your “business” estate plan (write your continuity plan or the company’s succession plan) in a rough draft form. Cross-check it with your “personal” estate plan’s content and provisions.

I suggest you examine your shortfalls in your current financial and business plan.

For example, how would your plan continue tomorrow if your health changed or you died unexpectedly? A discussion about business interruption insurance with your insurance advisor may be apropos. Life insurance, disability insurance, long-term care insurance and key-person insurance coverage may be some of the additional topics of conversation.

Let’s talk about life now. Your personal and business estate plan should create a foundation of permanence. So what needs to be done during your lifetime?

Effective communication

Keep your employees in the loop regarding marketing, business development and succession issues. Continue to share with them your vision for the company, and assist them in perpetuating the business mission.

Keep in mind, when you are considering a merger or acquisition, confidentiality and non-disclosure agreements will dictate the amount of information that is made public. Your legal counsel will provide you with the appropriate advice to keep the conversations going, while at the same time keeping employees aware. For example, many firms are introducing business succession planning as part of the overall organic and non-organic (i.e. merger/acquisition) business development process. The introduction of non-organic growth may ease employees in the concept that “change will be constant as you grow.” In change, business owners, principals and culture will evolve. So begin planning for that transition early on in the marketing discussion. Each company today is being challenged to reinvent itself continually. Make “change” an acceptable word within your conversations.

Assemble the right team of advisors

It is important to have the right team in place (e.g. attorney, CPA, financial advisor, insurance expert, business valuation expert, banker, others). Good advisors will be important in business succession planning throughout your business career.

Continue to re-evaluate your professional team as your business needs evolve.

Keep in mind that when you eventually sell the firm, you may need to choose a different combination of advisors to effect the ultimate disposition of the company. For example, what if you want a portion of the sale of your interest in your business to go directly to a charitable organization or to your own donor-advised fund? This type of transaction may minimize the taxes on the transaction and support a personal philanthropic purpose. You may need to recruit a new member to your team who is well-versed in philanthropy and using charitable techniques to transfer more wealth to your intended beneficiaries.

Your life-work balance

Continually revisit your personal plan for manifesting your life’s purpose in non-business ways. As you exit the company, how does your business and personal financial plan perpetuate your life’s purpose? Have you identified ways to re-direct your enormous talent and manifest it into another purpose? As you look around your city and community, would volunteering satisfy your goal to make an impact on your city or the community and fit into your life’s purpose definition of the transition from success to significance?

These are elements that you need to address with your wealth management and life-planning coach. I look forward to your comments and questions.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at