Avoid These 5 Common Pitfalls During Your Succession Planning Process When Looking to Extract Value from Your Company

A blog, from our friends and strategic partner ODEA.

So, you’re a fan of “Succession” on HBO? Us too, purely for the entertainment! We never want to see a family business go through the drama that the Roy’s portray as they exhibit all the dangers of not having a succession planning process. Even though it can be daunting to try and answer, “What’s your number?” when it’s tied to both the value of your business and the amount you are seeking to extract after the sale or transition, there is no more important question for a business owner to decide. Luckily for us, our Strategic Partners have five pitfalls you can make sure to avoid during your succession planning process to not end up like the Roy’s!

“It’s hard to boil it down to one red flag but a common theme is a lack of trust. Perhaps the exiting party doesn’t trust the newcomer with certain information that will be critical to know as the business moves forward. Or the newcomer has his/her own ideas and doesn’t trust or acknowledge the expertise and experiences shared by the exiting party. A lack of trust amongst the major players will usually be a sign that significant hurdles are already in play even before the succession takes place.” – Karen Snodgrass, CPA, MBA, Principal at Cray Kaiser Ltd.

“The biggest red flag that the succession will not go well is lack of communication. There needs to be consistent, clear and candid discussions about the expectations and desired outcomes for all parties. It never works if we assume that we know what the other party is thinking!” – Mary Beth McLean CFP, MBA, Partner at Private Vista

“The first red flag we look for in the succession planning process is there being no buy-sell agreement in place to allow a non-participating family member to gracefully exit the business.” – Rachel Bossard, JD, Partner at Burke, Warren, MacKay & Serritella, P.C.

“Most often, we see business owners starting too late and not involving their entire team of advisors. If you make decisions in a vacuum and don’t discuss how they impact your goals for the next phase of life for you and your loved ones, you may take steps that don’t set you up in the best way. Knowing your number is one piece. Knowing what you are moving towards is equally important. How will you fill the day once you are not running your company? What will be your identity? Your purpose?” – Nicole Romito, CFP, CDFA, Partner at Private Vista

“From my experience, communication is the name of the game! Expectations are built off of information and information becomes relevant through communication. When we see a company whose ownership has a high level of communication and information sharing, the succession process will likely have more traction. Also, understanding that succession is not only a plan or a document but also a journey that will have a number of bends and discomfort along the way. A solid footing in ownership communication can smooth out many of these challenges. – Deanna Salo, CPA, Managing Principal at Cray Kaiser Ltd.

Interested in learning even more? Join us on Wednesday, March 23rd, for a panel discussion on the need for wealth management during your succession planning process. Event details and registration HERE.




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