Who will take over your business?
by Bruce Wilson
In the HBO drama “Succession,” the failure of its corporate patriarch to plan for the future of his family empire turned out to be a sobering lesson for business owners of what can go wrong when you keep your succession cards too close to your vest.
As a business owner, it’s hard to imagine your company surviving without you. But even if you’re not going anywhere now, you have to make sure your company and your successors are equipped to handle the impact of change when you leave.
By creating a succession plan well in advance, you have plenty of time to create a realistic continuity plan. There’s strong interest in the green industry for owners with a desire to sell. Investor interest and valuations are at an all-time high (but not automatic) and capital is available. However, whether you’re looking to hand your business over to family, pursue a strategic consolidation or maximize your value by selling, choose an option that’s right for you.
‘Til death, do your part
It’s tempting not to rush a family transition, but sudden illness, death, divorce or other life event can leave a totally unprepared family member to either run the business or sell it. In a complete succession plan, you must be prepared for departures such as retirement, death and disability, and have an implementation plan to run the organization and preserve the loyalty and support of employees, clients and creditors.
Identify potential successors and cultivate a strong leadership transition pipeline to reduce risk. Put a good management team in place to make it possible for you to gradually step away and still derive income off the business. This also protects your family in case you become incapacitated, and allows your business to carry on.
Family comes first, or does it?
Some family business owners begin to tighten control as they look toward succession. To achieve balance between control and flexibility, have open and honest conversations to figure out how generations can work together to execute a shared vision.
Some owners are adamantly opposed to involving family in the transition as they have either seen or heard of the toll it took on family dynamics. The issue of being fair to all family members can lead to postponing the process and leaving the organization vulnerable in the long run.
The kids will be alright
Successful family leadership transitions rely on the commitment of future generations to earn their leadership. Some owners have required siblings to work at other companies first before joining the family business at an entry level and working their way up. This has been shown to be quite effective in developing leadership skills, and gaining the trust and respect of other employees.
ESOP
Some owners prefer to sell to employees to reward them for their loyalty and share in the benefits of helping to build a valuable asset. Employee-owned business models can be a good option for some owners. Again, you cannot start the process soon enough.
Still not sure? Bring in the professionals
Creating a board of advisors or engaging an ad hoc team of professionals to help is one of the smartest things you can do, no matter where you are in the process. CPAs, attorneys, estate planners, M&A advisors and other business owners who have successfully transitioned their ownership can help you navigate both the transactional complexities and the equally important human dynamic.
Bottom line
“Begin with the end in mind” is my motto for running a business, whether it’s a simple problem to solve or preparing your company to sell at a good price. The key piece here is to grow in the direction you want to go: protect your assets and build a strong management team. Buyers will value a company with a good management team higher than one that is dependent on the owner.
Selling a family-owned landscape company with over $10 million in sales can result in generational wealth. So, this should not be taken lightly to maximize the benefit.
Reprinted with permission. GIE Media. Lawn & Landscape October 2024 (c)
