For for than 30 years, Joe Andolino has been advising company leaders on developing advantageous succession plans, and it’s often the last thing owners want to plan for. The most dangerous period that a company faces is that of succession, when ownership and authority passed from one person to another. In a family business, especially a company that goes from the first to the second generation, typically changes from one person to many, and that is a challenge for both the company and the family. It is estimated that 85% of a family business crises occur around issues of succession.
Joe Andolino cautions, the family must realize that succession is not simply a business decision, a financial decision or a family decision, but a process that must take place for many years.
Why do we need an estate plan?
What can you do if you do not have one?
No one disputes the fact that it takes a long time to train a successor who has the experience and wisdom to lead the company. Most owners are eager to introduce their heirs in the company, but are they ready? This is key issue. Most directors of family businesses do not have a succession plan, and it is irresponsible not to.
For companies that are just starting out, this may jeopardize the future of the company and family. If it is argued that the heir is overwhelmed and cannot make good decisions, other members can step in. If the company has an independent board, the owner will be in luck. It can work miracles if the recommendation of preparing a succession plan is derived from the board. As part of the long-term strategic plan of the company, the board may hold him responsible for the succession, which can be good or bad.
Joe Andolino reminds company heads, the lack of a succession plan may have other ramifications. The biggest risk is losing employees and customers who do not trust the company to survive the transition. Key employees may leave because his understanding no one seems to be taking over the time. The lack of a succession plan is an opportunity that can benefit competition, absorbing its market share and creating uncertainty in the minds of customers. Will this company be a viable source for the period that will happen without leadership possible? Competitors can convince their customers and suppliers that the answer is a resounding “no”.
Business owners should always start early and consult a tax attorney for expert advice.