Why Succession Planning Is Important

It is estimated that some 80% of private firms in Canada are family owned, and the majority of those have no succession plan.
The aftermarket is a good reflection of this statistic, since it has a significant population of shop owners trending towards retirement age without a proper succession plan in place.
To help owners learn more about succession planning, this issue features a detailed article on page 16 by well-known international management speaker and business coach Donald Cooper. Cooper has seen it all when it comes to succession planning, and he offers excellent advice on what’s important – and what to watch out for.
With the level of consolidation now happening in the aftermarket at the jobber level, it is vitally important for every family-owned jobber store to resolve the question of succession. Yet many owners stubbornly refuse to face this issue. The most common reasons for not doing so include resistance by the owner to let go of the reins;
fear of retirement; or inability to find or choose an effective successor.
Transferring ownership can be highly emotional and complicated by the attitudes of family members, which is why it is often ignored until it becomes a pressing issue. Often, the owner is then forced to make a very important decision in a short amount of time, with little or no due diligence.
Leaving succession planning until it is too late almost always results in a forced, ill-informed decision with the business transferred into reluctant or incapable hands.
This can result in the business becoming severely disrupted, as arguments take place over who should own or run the business. This lack of leadership could have a disastrous effect on sales and morale within the business.
In some cases, transferring ownership and control of your business to a family member might not be possible or feasible. After careful consideration, you might conclude that a current employee, someone who knows the business and is committed, is best placed to take the business forward. If such a person does not exist, you might be forced to bring someone in from the outside.
Another option is selling the business outright. There may be a need to raise cash (perhaps to fund retirement), the absence of a suitable successor, or a family that has no desire to continue its involvement in the business.
Deciding to sell can be tough for owner-managers, who might feel reluctant to let go of a business they have nurtured for years. Careful preparation will help to lessen anxiety, until you are sure you have found the right buyer. Knowing exactly how, when, and to whom the ownership of your business
will be transferred is the best way for you to maximize your returns and avoid a disastrous transition.
Choosing the right successor or buyer and making sure it happens at the right time is the best way to ensure a happy retirement and the ongoing success of the business. However difficult, it is a necessary part of the process. It’s never too soon to start. nJN