2A — September 25 - October 15, 2015 — M id A tlantic
Real Estate Journal
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher .................................................................Linda Christman Publisher ....................................................................Joe Christman Section Publisher .........................................................Steve Kelley Senior Editor/Graphic Artist ..................................... Karen Vachon Production Assistant ........................................................ Julie King Associate Publisher ................................................. Alissa Aronson Associate Publisher .............................................. Barbara Holyoke Office Manager .........................................................Joanne Gavaza Contributing Columnist . ......................................... Glenn Ebersole Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockand, MA 02370 USPS #22-358 | Vol. 27 Issue 18 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com
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I 10 Deadly Succession Planning Mistakes To Avoid! Glenn Ebersole t is strongly recommends that all business owners (especially small business owners) develop succession plans. And to develop them NOW, rather than later. Suc- cession planning is very impor- tant to the long-term success of any company. Leadership transitions in business affect the entire organization's con- tinuity, employee retention, client retention and returns on investment. It is essential to create and implement a process that creates visibility, account- ability and greater integration of all facets of the business. The rapidly changing de- mographics in the workplace prove that there is a real chal- lenge to find talent for leader- ship roles. Companies that are able to respond proactively with strategically developed and implemented effective leadership succession plans are in a superior position in the marketplace and global economies. Here is a list of ten (10) deadly succession planning mistakes that small businesses make and that you should avoid. The ten (10) deadly mistakes are: #1: Develop a succession plan without any strategic plans. A succession plan will define a company's business heirs, but that is only part of what is really needed. The other question beyond "WHO?" is the question of "WHAT?" will they inherit? The absence of a strategic plan will mean there are no vision, no mission, no set of core values and goals and no strategic action plan. It is criti- cal for current business owners to spend time planning for the future. Every business needs strategic plans to increase its viability and its market value. #2: Fail to develop clearly focused and defined goals. If businesses do not have clearly defined andmeasur- able goals, then they are un- likely to achieve successful succession planning. A ma- jor goal of succession planning should be to address issues relating to when is it time to sell or transfer power, what will the current owners do after the transfer, what percentage of the purchase price can be
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The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
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financed, what would define a great buyer for the future of the business, and what tax implications need to be consid- ered. All these issues remind us of why so many business owners become overwhelmed and scared to think about suc- cession planning when these key issues have not been ad- dressed. #3: Delay the initiation of work on the succession planning. There are a variety of reasons firms procrastinate about developing succession plans: they will say there are too many pressing matters at hand; they get depressed thinking the subject of succes- sion planning; there is plenty of time; and the current owners will be around for a long time. It does amaze me that most small and medium-sized busi- nesses fail to appreciate that accidents can and do happen to business owners and that is when the succession plans really pay dividends. #4: Fail to strategically develop a market for the business. Too many small and medium-sized business owners operate under the myth that when it comes time to exit their business, they will simply sell the business, and retire with a bundle of cash. Unfortunately that is more of a myth than a reality. It is a reality that thou- sands of business are listed for sale each year, and there are no buyers for those businesses. Why? Basically because there is no demand and therefore current business owners need to market their businesses and "create demand" for owning the business. Otherwise, they prob- ably will not have any choice in selecting successors or a new management team. #5: Fail to obtain a profes- sional independent valu-
ation of the business. It will be hard to attract good buyers or successors unless there is agreement on a real- istic value of the business. Too many times business owners are shocked that the business they have developed and the capital they have acquired is valued much less in the mar- ket than they personally value it. Another important thing to remember is that the value of the business may also depend on external factors beyond the control of the current owners, and contingency business val- uations also may be required. #6: Don't tell the staff about your succession plans. Keep your succes- sion plans a secret. When the staff is left in "the dark" as to who will be the succes- sor in running the business, it creates the impression that there is no succession plan and there is real concern about how the business will continue past the current owners. And another nega- tive result could be that the new owners will be treated with suspicion. A significant missed opportunity could re- sult from keeping the succes- sion plans secret since it will hinder existing managers and employees from identifying themselves as possible suc- cessors. And without a firm commitment or expectation about the future, key person- nel could decide to leave the business. #7: Commit to sell the business to an insider who does not have the needed funding to purchase the business. For sentimental reasons, many business owners prefer to sell their business to a trusted employee who has been with the firm for years. But, in continued on page 18A
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