Seccession Planning

I've been harping on about it for a while now to my clients and now here's some evidence of a lack of forward planning by many businesses. This article from Simon Telfer is from the NZ Herald website today.


Simon Telfer: Tune in to the alternatives before dropping out of your business

The unpreparedness of our nation's privately owned businesses was highlighted again last week with the release of the ASB Succession Planning Monitor for the third quarter.
The report found that fewer than half the respondents were ready for an unexpected offer, falling to a 24 per cent state of preparedness for negotiating a minority shareholding with a key employee.

This report was consistent with other surveys this year, which indicated that the key reasons for business owners not planning were time, complexity and a lack of desire to think about leaving.
It's this last point that gives rise to a conundrum. Healthier and wealthier, the baby boomers are no longer happy to have their nose to the operational grindstone right up to the day they exit their businesses.

But neither can they stomach the idea of waking up one Monday morning as an "ex-business owner". They believe they still have a significant amount to contribute to their business, matched by a desire to remain commercially stimulated and connected. Securing a mid-week bowls club membership or joining the North Shore coffee set doesn't appeal. Flexibility is key. After all, they've got their second OE to organise.

Generational succession is another option open to family-owned businesses. However, it is becoming less frequent.

The third most commonly advanced succession solution is an employee or management buyout. This concept is sound, but few business owners have had the foresight or courage to hire people better than themselves and then develop them to be in a position to realistically undertake an MBO. This is particularly the case in smaller companies.

So recognising that a traditional succession planning approach may be needed in time, what intermediate solution is going to fulfil these baby boomers? One that allows them to act strategically in a business that still excites them but without the people management and other operational headaches?

Precession planning is one solution, and it starts with a chat about hats. For a business owner who has routinely, but subconsciously, worn the three hats of employee, director and shareholder for the majority of his or her working life, this can be a revelation.