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The 12 pitfalls of Succession Planning

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 Various circumstances can make succession planning either difficult or impossible:
  1. 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
  2. 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.
  3. 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.
  4. No succession plan Without a plan, there is no defined strategy to carry out the transition of the business.
  5. 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.
  6. 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
  7.  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.
  8. 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.
  9. Territorial dominance The urge to protect one’s turf is revealed when his own children or key executives intimidate an owner in the business.
  10. 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.
  11. 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.
  12. 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

 


 

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