The 12 pitfalls of Succession Planning
Article Licenses: CA, DL, LI, LW, TX, UK, US
Compliant content provided by Adviceon® Media for educational purposes only.
Various circumstances can make succession planning either difficult or impossible:
- The right successor quits A son or daughter may decide to leave the firm after having worked in the family business for years without a commitment to a concrete succession plan. “I think one’s feelings waste themselves in words; they ought to be distilled into actions and actions bring results”. — Florence Nightingale
- Business succession isn’t viable Perhaps there is no child-successor or executive available or willing to take on the responsibilities of your firm. There may be changing circumstances such as a new competitor, loss of huge contracts, or the product or service is becoming obsolete.
- You might want to sell The success of the business is not necessarily based on flourishing over successive generations. It might even be achieved by selling the company at the right time to create investment wealth. Or unexpectedly, a competing business or a group of executives may offer to buy it.
- No succession plan Without a plan, there is no defined strategy to carry out the transition of the business.
- Founder-owner’s inability to relinquish control One may hold on to a company because it has provided income for years, offering a means to control one’s destiny. Much of the owner’s self-identity may have evolved out of the business.
- Power struggles with partners There are situations that incite resentment among co-owning siblings or partners preventing a succession process. ‘”Tis the sorest of all human ills, to abound in knowledge and yet have no power over action”. — Herodotus
- No retirement goals Many founder-owners have no interests outside the business. If their work is their life, they may have no intention of retiring.
- Can’t face mortality Many owners (including sensitive children) find it hard to discuss the issues associated with aging, loss of health or death. Entrepreneurs, who have carved out their own destiny, may believe they are somewhat immortal, even if facing real health risks.
- Territorial dominance The urge to protect one’s turf is revealed when his own children or key executives intimidate an owner in the business.
- No trust of successor’s skill It is often hard for parents to see their children as capable successors. They may criticize even their good efforts.
- The owner dies In some cases the owner dies, even before considering succession planning, leaving the responsibility to a spouse or child to conclude or abandon.
- There is no life insurance solution in place Talk to your advisor how to use life insurance planning for maximizing your estate or your parents’ as you create a strategy for your business succession. There are ways to fund taxes and buy out partners and to equalize an estate fairly among heirs. “The real risk is doing nothing”. — Denis Waitley
Publisher's Copyright & Legal Use Disclaimer Replication is prohibited beyond the use of this
website. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or
omission, or any financial decision or purchase or use of a financial product, including investment or insurance
products, and suggest that a professional advisor's counsel is sought, especially with regard to Mutual Funds and
Segregated Funds and Investment Funds which have investment risks as noted in the Mutual Fund Disclaimer. All
rights reserved by Adviceon®
Disclaimer The particulars contained herein were obtained from sources which we believe are
reliable, but are not guaranteed by us and may be incomplete. This website is not deemed to be used as a
solicitation in a jurisdiction where this representative is not registered. This content is not intended to provide
specific personalized advice, including, without limitation, investment, insurance, financial, legal, accounting or
tax advice; and any reference to facts and data provided are from various sources believed to be reliable, but we
cannot guarantee they are complete or accurate; and it is intended primarily for Canadian residents only, and the
information contained herein is subject to change without notice. References in this Web site to third party goods
or services should not be regarded as an endorsement, offer or solicitation of these or any goods or services.
Always consult an appropriate professional regarding your particular circumstances before making any financial
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investment
funds, including segregated fund investments. Please read the fund summary information folder prospectus before
investing. Mutual Funds and/or Segregated Funds may not be guaranteed, their market value changes daily and past
performance is not indicative of future results. The publisher does not guarantee the accuracy and will not be held
liable in any way for any error, or omission, or any financial decision. Talk to your advisor before making any
financial decision. A description of the key features of the applicable individual variable annuity contract or
segregated fund is contained in the Information Folder. Any amount that is allocated to a segregated fund is
invested at the risk of the contract holder and may increase or decrease in value. Product features are subject to