One of the most important tactics that a business owner can pursue is the idea of grooming and developing an eventual replacement. Unfortunately, far too many don’t address this issue in a timely manner and are left forced to do so when one of the Big D’s hit – Death, Divorce, Disablement, Disagreement, and Disinterest.
According to a recent study by the Center for the Middle Market, 45% of middle market businesses face challenges lining up successors for critical roles in the business…
Middle market businesses are frequently overly dependent upon owners and a few key executives for core competencies and the company’s strategic vision.
Business owners that we meet usually state that their No. 1 reason for failing to adequately plan for their succession is simply a lack of time. This is largely overcome by identifying a successor early in the life of the business and beginning to mentor several years before the planned departure. Again, Greenberg puts it this way:
Even if a transfer of control isn’t in the business’ near-term plan, it’s crucial for owners and their senior leadership to identify and develop a bench to fill key executive roles. The bench can be internal existing junior executives that are developed into leaders; external recruits with deep industry knowledge and leadership skills, or a combination of both.
We recognize that the idea of “developing a bench” of associates to be mentored and groomed for key roles to many entrepreneurs is a non-starter. It takes time, hard work, and forward thinking to do this. But the value to you as the business owner will pay off later when negotiating with buyers. As we have said for years, buyers hate risk and try to avoid or minimize it at all costs. If a business is dependent on the current owner for key daily decisions and no successor has been prepared (or even identified), many buyers will be concerned.
The issue you need to realize as a business owner is that you could be leaving thousands and thousands of dollars in unrealized value on the table. To protect that value, all you need to do is hire, train, and mentor a solid person to replace you. When you consider the impact on your financial legacy, it makes sense to go through a succession plan replacement program.
Need more information on how to do so? Please use these links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
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