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Whether you built your company from scratch, are a second- or third-generation business owner, or run the local division of a national firm, it’s never too soon to plan how to continue your legacy when you’re no longer in charge. Succession planning should be a thoughtful process that identifies the right people and assures they’re ready to step in when you’re ready to step away. Here are tips for successful succession planning from BATC-Housing First Minnesota members.
Time has a way of sneaking up on you. One day you’re climbing up on the roof to check your sub’s work, and the next your knees are screaming ‘no more ladders!’ Procrastination will only delay the inevitable. Start the process by discussing the future with your management team. Make sure you have a short-term plan for carrying out day-to-day business in case something happens to you (accident, illness), and then lay the groundwork for a longer-term solution for when you’re ready to retire.
“It’s a journey, not a destination,” explains Carla Warner of Warners’ Stellian. The Warners have spent the last decade or more working with outside help to figure out their succession plan. The nine second-generation Warners have been making room for 37 third-generationers for years, and expect the first few fourth-generation members may want to join the family business before too long.
“We’ve been working on how to pass along the business in a way that’s fair and equitable for all,” Warner says. For them, that meant setting up a system of shares in the business. Each owner can gift or sell their shares, and must do so at a certain age. It’s a fairly complex system, but works for their very large family. “What we’ve learned is that there isn’t one plan that works for everybody. You have to do what’s the best for your family.”
Your company is your legacy, so make sure you recruit the right people for the right positions. This is where family-run businesses can be tricky, especially when your skillset is different than your children’s talents. Look at all your current (and future) employees as potential leaders, and work with them to develop the skills your company needs.
For Tom Wiener of Cardinal Homebuilders, Inc., his homebuilding and remodeling company succession is pretty much a given. He took over his dad’s building company and now his two children are already deeply involved in the businesses and will be taking over when he’s ready to leave.
Wiener’s realty firm, however, is in partnership with his sister who has three children. “That one is more complicated,” he says. “We’ve met with a professional business consultant already, and our next step is a family council.” In that case, there is a long-term valued employee who will also be included in the planning.
The most successful companies have a vision that’s both comprehensive and written. Your business plan should include your long-term goals as well as a sketch of how you envision the company to continue after you’re gone. Then, share your plan with all your employees. Your people can’t do their best when they don’t understand your goals.
Create an environment that assures your top performers get the training and feedback they need to stay on track. Especially if you’re training your next generation, make sure to give them opportunities in all areas of your business, and discuss what they like best and what they feel they are most suited to do.
As you hone in on your succession plan, you’ll want to begin filling in any gaps sooner rather than later. Whether you need a skilled controller to keep a handle on finances, a marketing team to bring prospects to your door, or a project super that assures top-quality construction, adding talent now will position your company for success into the future. You know that as a business owner, you shouldn’t be spending all your time doing tasks, even tasks you’re really good at. Remember, your real job is not to do the work, but to ensure your company has the best people to get the job done the way you want it done, today and long into the future.
Now that you’ve shared your vision, offered the training and opportunities to your people, and hired talent to fill in gaps, you need to follow through and measure how it’s working. Meet regularly with your senior staff. Let them help set goals for their own development.
You may want to seek outside help at this stage, too. “We have our company evaluated every other year to value the shares, thus value the company,” says Warner. By using an outside crew, the Warners are assured that their legacy is on track to serve their family for years to come.
“Just get it done,” Warner concludes. “If you have it in your head but it’s not down on paper, it can be a real hardship for the family and a lot of the wealth can get lost. If you don’t have a structure in place that’s set up right, it might not turn out the way you want.”
As a second-generation business owner, Wiener does have some advice about handing over the business. “It’s a hard thing for anyone in a business like ours,” he explains. “It’s a hands-on business and tough for us to give up control.”
Wiener has no plans to walk away yet, but is thinking about taking more time away, and wants to make sure he’s as ready as his kids are. “I try to give them a bit more control every year and try to make sure I’m not in the way.”