Water Well Journal

November 2022

Water Well Journal

Issue link: https://read.dmtmag.com/i/1482057

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Page 26 of 71

H ere's a shocking but true statistic: 100% of business owners will exit their businesses someday. The only question is whether that exit will be planned and seam- less or chaotic and destructive. Succession planning, also called exit planning, is the pro- cess where a business owner creates a planned transition for the continued success and viability of the business—one which benefits the owner, the owner's family, the owner's employees, the company's key customers, suppliers and other business rela- tionships, and the community at large. It goes without saying (but we'll say it anyway): Every busi- ness needs a succession plan. So how can you make sure to put the success in your succession plan? These six steps will help. 1.) Overcome the obstacles to progress Many succession plans never get implemented simply because the business owner never even gets started with the planning process. While almost all business owners know succession planning is critically important, they often can't or won't act. Why is that? Well, there are a lot of reasons: • Succession planning is new and unfamiliar territory for most business owners • The owner has difficulty articulating goals or recon- ciling conflicting goals (as will be described in more detail) • Concerns about future income and cash flow • Concerns about retaining control • Concerns about maintaining confidentiality vs. need to involve key people in the process • Fear/uncertainty about the future and the business own- er's continuing role/identity • Working "in the business" is much more fun and inter- esting as well • Planning takes too much time and costs too much money to realize • Concerns about how the plan may affect key people (spouse, children, key employees). We can't move ahead with any planning until we're able to get the business owner comfortable with each of these points. We do that by addressing each one head-on and having open and honest conversations. Many times, the business owner is stuck because he or she can't articulate their concerns, and nothing happens until those concerns are expressed, acknowl- edged, and addressed. While all the concerns above are extremely important, one of the common concerns that holds up a succession plan is the business owner's uncertainty about what a business transition means for the owner's personal identity. It's unrealistic to assume that a business owner who has put his or her heart and soul into the business for 40 years will simply walk away and sit on the beach. In addition to the business owner's financial security in retirement, a detailed and specific plan is needed for the business owner's personal life. What will they do with their time? How will they interact with the business after the transition (if at all)? What will their identity be after the transition? Many business owners won't be able to articulate these concerns, but you can be sure they do exist and need to be addressed head-on. Once we identify and address these road- blocks and the business owner is ready to move ahead, it's time to start formulating a plan. 2.) Start with the goals That's pretty obvious, right? Yes, but what we're talking about here is getting really deep into the goals before doing anything more. What are the owner's goals for the business? What are the owner's goals for the family? What does the owner want to do after the transition? What is the owner's retirement needs and wants? Notice that many of these goals speak directly to the concerns raised in the questions in the first step. We find that the normal business owner has multiple goals they are trying to accomplish through the transition. Some common goals include: providing for the owner and their spouse's retirement needs; preserving the company and the owner's legacy; "doing no harm" to succeeding generations; maintaining confidentiality (particularly with employees, cus- tomers, suppliers); minimizing taxes; and preserving family harmony. Seems simple enough, but the challenge is many of these goals conflict with one another. For example, most business owners have a fundamental goal of maintaining family har- mony. But what happens when there's only one family mem- ber capable of continuing the business? Which goal trumps: maintaining family harmony or ensuring that the right person is empowered to lead the business into the future? To have success, we need to first uncover the business owner's goals—some of which may not be stated. Identify facebook.com/WaterWellJournal WWJ November 2022 n 25 SUCCESSION PLANNING 101 continues on page 26 Succession Planning 101 It's critical to follow these six steps to protect your business—and your family. By Eric Duffee It goes without saying (but we'll say it anyway): Every business needs a succession plan.

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