For entrepreneurs and business owners in Franklin, TN, succession planning gives you control over your company’s future leadership and ownership transition. But for busy leaders consumed with everyday operations, the ins and outs of succession planning easily become an opaque topic full of uncertainty.
As your FocalPoint business coach focused specifically on supporting Franklin entrepreneurs, I commonly help demystify succession planning for owners seeking to put robust contingencies in place. In this article, I’ll overview answers to frequently asked questions to unravel key aspects of the succession planning process.
What driving factors make succession planning essential?
While selling or transferring a business can happen suddenly due to health or other emergencies, owners who plan proactively build enterprise value, protect against instability, and position the company for continued prosperity by selecting and preparing successor leadership systematically over time.
What foundational elements factor into the planning?
Key inputs needed include assessing owner/shareholder goals, quantifying current business valuation, clarifying legal entities and ownership breakdowns, detailing known growth opportunities, and analyzing historical and projected financial performance.
Who leads driving the planning process forward?
While external support is highly advisable, business owners themselves need to lead planning discussions to ensure the tailored plan aligns with their vision. Key stakeholders like family members, partners, management teams, and boards should participate actively in shaping succession priorities.
What are common goals addressed in the planning?
Typical goals covered include continuity of operations, maintaining company culture, providing owner/shareholder liquidity, transferring control equitably amongst stakeholders, rewarding key employee loyalty, and funding important initiatives like growth, capital investments or R&D post-transition.
What common succession path options exist?
Main options typically include internal transfer to family member or existing management, selling outright to a private equity firm or competitors, management buyout (MBO), employee stock ownership plans (ESOPs), and hybrid approaches based on how existing shareholders wish to realize value.
How long should you plan for the transition to take?
18-24 months is fairly common but more complex situations with multiple stakeholders, complex legal structures, public companies, or the need to identify/prepare external successors can require 3-5 years of advance planning to cover all aspects smoothly.
What mistakes do owners often make?
Failing to plan early enough and clearly communicate intentions often sparks internal turmoil, hurts company value by sparking employee turnover, and leaves owners without desired options when pressed into an emergency transition. Also, avoiding professional guidance usually makes for more tax and legal liability exposure.
Who can help advise the planning process?
CPAs, business attorneys, valuation pros, wealth managers, corporate development consultants, succession specialists, and external board members all provide helpful perspective. As your FocalPoint coach located right here in Franklin, I also work with owners to align planning with their overall leadership vision and growth strategies.
Does this overview shed some light on key succession planning considerations for your Franklin company? As an entrepreneur myself, I understand how daunting this can appear balancing daily operations. Please reach out to schedule a free consultation where we can discuss your biggest questions and obstacles so you feel empowered tackle succession planning systematically when the time is right.
