The idea of succession planning may be a foreign concept to you. But, if you’re a small business owner, it shouldn’t be. In fact, planning who will lead your business and how they will lead it after your exit could be the single most important business strategy you put in place.
A recent report by Nationwide, however, reveals some shocking statistics when it comes to the state of planning for the future of today’s small businesses. Do you see yourself in any of the following scenarios?
The Problem with Succession Planning
According to the report, three in five small businesses do not have a business succession plan in place. In nearly half of those businesses without a succession plan, the business owners simply believe it is not necessary. Others neglect succession planning for the following reasons: Not wanting to give up one's life work, not knowing when to create one or with whom to work on it, not having time to develop a plan, and being too overwhelmed with government regulations instead.
The Irony Within the Baby Boomer Generation
Don’t assume it’s younger business owners who most neglect to plan ahead for succession. Perhaps some of the most interesting findings of the survey reveal that millennial business owners are most likely to have a business succession plan in place (61 percent) in comparison with Baby Boomers (32 percent) and Gen Xer (32 percent). Why?
"My assumption is that Baby Boomers believe they'll work in their current position, driving the company's success until they retire, while Millennials hope to run multiple companies and show how they've successfully positioned the company before they leave," says Kirt Walker, president & COO of Nationwide Financial.
The truth is, you WILL leave your business. You may retire, quit, close the company, sell the business, or work until you pass away. Each scenario ends in you leaving the business. If you intend the business surviving after you’ve left, you’ll need a succession plan.
Why Your Financial Advisor Should Know Better
The best way to start to put a succession plan in place is by asking yourself four questions provided by San Antonio business consultant John Dini, one of the nation’s leading experts on business ownership and exit planning. Then, seek professional guidance.
Nationwide also found that among business owners who have a business succession plan in place, less than half have discussed their plan with a lawyer (48 percent) or a financial advisor (40 percent). Many small business owners who have not discussed their succession plan with a lawyer or financial advisor say they have not done so because they do not think it is necessary (48 percent).
This could be a critical mistake. So, too, could be seeking the help of advisors who don’t take succession plans seriously.
A different study found that only 30 percent of financial advisors have succession plans in place themselves and many of those plans are of dubious quality. Be sure your advisors have your organization’s longevity in mind and aren’t simply focused on the tax season or latest business challenge at hand. If you’ve never discussed succession or an exit plan before, address it now. If they brush it off, move on (contact us for a second opinion, if you’d like). Your future and the future of your company depend on it.
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