At MGA, we don’t like to see business owners procrastinating when it comes to succession planning. We like to see them creating proactive exit strategies — a critical factor in owning a business. As a business owner, you should feel confident that the hard work and many years you put into your business will carry on.
When should you start planning? What are some common mistakes you should try to avoid? What is the best way to efficiently manage the process?
In this blog, MGA Partner Paul Grossbard shares some tips on how to manage and implement a successful succession plan for your business.
How do you know when it is the right time to start planning?
There is really no single “right time.”
For most business owners, when they have a plan in mind or know what they would like to happen to their business — whether they want to pass it down to the next generation or whether they want to sell it to the management of the company or whether they want to sell it to an outside third party — that's when the planning should occur.
If you're starting a business today, we recommend having succession planning as part of that startup process. What is your goal? What do you want to do with your business? How do you want your business to be transitioned? These are all factors you should be thinking about from the beginning.
What are some key areas that make a plan successful?
Having it clearly communicated and knowing what you want is key.
Now, that doesn't mean that plans can’t change. Life always seems to get in the way of our best-laid plans. So, it’s important to be flexible and open to making changes in your approach if necessary. For example, you may initially think that you want to leave the business to your child and your child later decides they don't want the business. Now your options are transitioning to the management or selling to a third party.
Having a plan and having a direction is key. The successors, if they are identified, should also be involved in the planning.
Are there any commonly overlooked areas that business owners should be aware of?
One of the biggest mistakes that business owners can make is assuming that their children want to be involved in the business. Ask.
You may find that even if your children are working in the business, they may not want to run that business in the future. They may not feel comfortable, or they may have some different long-term goals that they would like to achieve with their lives. It may be hard for them to talk to you about these things as they don’t want to disappoint you, so it’s important to ask and not just assume what they want.
For any transition to be successful, succession planning has to be communicated. We cannot stress this enough. People have to understand it. People have to know what the expectations of them are going to be. And most importantly, they have to want to do it for it to work out successfully.
Do you have any advice on how business owners can manage this process while still performing their day-to-day jobs of running their businesses?
Again, it all goes back to planning. If you know what you want to accomplish on the front side, write it down. You can then work with your professionals on how to execute it. Then you may want to set up a process where every year or every three years — whatever works best for you — you revisit that plan and see if it's one that still makes sense.
It doesn't have to be so daunting. Simply pick a direction. And as the business develops and as your needs and wants and objectives evolve and change, so can that plan.
It should be dynamic, like most of the planning that you do for your business.
We’ve been there. We can help.
It is always better to be proactive versus reactive, and at MGA, we practice what we preach. While our founding partners, Russ and Paul, are actively engaged in the business and are as client-focused as ever, they have taken definite steps to prepare the Firm for their retirement. Because of their proactive planning, we are all assured of what comes next for MGA.
In 2013, we added a new partner, Brian, who is not only 20 years younger than our founders but who shares our same values and goals regarding the future of MGA. In addition, the Firm is identifying and training future leaders to join the partner group.
By thinking ahead and allowing all of our partners many years to strategize and work closely together for the road ahead, Russ and Paul have never felt more confident in the direction MGA is heading — even after they are gone. “We’ve built something amazing here at MGA, and nothing would make us prouder than for it to prosper long beyond our years at the Firm,” says Russ.
Can we help you plan?