We all know the distinct shifts this past year has brought. It undermined our ideas of permanence and predictability. In our hearts we all know that life can change in a moment, but sometimes we don't fully grasp it until we see it playing out all around us.
In light of the very little control we have over what happens to us today or tomorrow, business owners need to step up and dedicate time to planning for the future.
Work Now Saves Trouble Later
Most privately held businesses do not have a formal (read: legally enforceable) succession plan and though we don't agree with that approach, we fully understand why it's the norm. No one enjoys discussing their possible demise, among other delicate subjects. In fact most of us go to great lengths to avoid such serious topics.
But whether this stems from procrastination or denial of the inevitable, topics like succession planning are critical to the health of a business and the future of its employees. Sooner or (hopefully) later, illness or another tragedy will steal away every company's leader. Without a clear plan for succession in place, the business could then quickly become directionless, rudderless.
This also opens up room for conflict between family members or business partners. And how unfair and overwhelming it would be for an already overburdened family to be left to deal with the demands of managing a business. This is especially true if the family wasn't very involved in the business to begin with. Without knowing what the leader's wishes were, opinions and opportunists can take over, and the business the fallen leader worked so hard to build could begin to implode.
Put Wishes in Print
If a business owner focuses on the gift they're giving to family and employees, that alone should be enough of an impetus to make a solid succession plan. But what if they do have someone in mind, and that person knows it? Does an "understanding" qualify as a succession plan? To put it bluntly, no. Unlike the fabled days of old, a handshake and a shared knowing aren't legally binding.
A good friend owns a successful business in the agriculture sector and has spent over 40 years building it. He is now up in age and not in the best of health. He does have a logical successor - a young man who has worked with him closely for almost 20 years. This capable employee already fills in and covers for his boss when needed, and he knows the business inside and out. That he would take over one day just makes sense.
These two have a rough understanding that they are co-owners of sorts, and that when the time comes, the employee will essentially step into his boss's shoes. But none of this is formalized, and nothing has been put down in writing. The roughly equal split that the two have agreed on is not formalized in any way. Neither is there a written plan whereby the younger man will assume control of the other half of the company. Besides the business itself, leased property is also a concern.
But this is a typical scenario. As is the tumult it brings. And for a successful, profitable business like theirs, it's not the cost to draft a plan that's holding up progress. It really comes down to procrastination. And as time passes, it's increasingly harder to talk about distasteful topics like illness or death. But a reluctance to address and resolve issues of tremendous importance for the business, its future, and both of the individuals and families involved just isn't a good business practice.
Facing Hard Facts
Besides not wanting to acknowledge his final eventuality, this friend could disagree with his younger protégé about certain business matters. But now, while both are sound and able, is the best time to flesh out plans and address lingering issues. This matter surely weighs on both their minds and taking care of the issue would set them at ease, knowing that regardless of what happens, the business is safe and employees will be cared for.
Truthfully there is no good reason to wait to handle succession planning. It's best for everyone's wellbeing to get these details down on paper and make them legally enforceable. As we enter a new year, don't leave your business, your successor, and your respective families in the lurch. Now is the time to make and adopt a formal succession plan for your business.
Experience, Empathy, and Sound Advice
At Calkins Law Firm, we know that it's not easy to talk about passing on your life's work to the next generation. But we also know that it's even harder when that day comes and planning is still on the backburner. Life shows us every day how uncertain our treasured realities have become. So we urge all of our clients to think seriously about creating a solid succession plan this year. If you need some sound legal counsel on that score, we're here for you - get in touch to learn how Calkins Law can help. Till then, our team wishes everyone the best health and happiness in the months to come!