Succession
planning is like making out a will. It requires you to consider death and
retirement, two topics most people would rather not think about. Succession
plans generally address the distant future. Without a plan in place, however, sudden events
could add great turmoil to your business. The construction industry is certainly no stranger to high risk and
death.
Why
a Succession Plan?
Business Survival
Even if you participate in the implementation of the plan,
several key players inside and outside of the company will have a vital
role in the successful continuity of the business. What if you are not
around for the transition? It could be sudden. How can severe disruption of the business be avoided?
A well-documented plan
communicated to all the players responsible for carrying on the business is
paramount to its survival.
Interests of
Family Members
The interests
of active and non-active family members should be protected. In the event of death, security should be provided to the surviving spouse and some inheritance to
other family members.
To minimize
the possibility of interference and disruption in future business
operations, each family member should know his or her role and responsibility. Without good communication, unreasonable expectations could
unravel the best plan.
Access to
Credit
Bonding
companies and banks have extended a tremendous amount of credit to
contractors. Many sureties and banks now require a formal succession plan to
grant such credit. The major issues concerning these institutions include:
-
Can the
company complete existing jobs under contract?
-
Will the
cash required to cover estate taxes severely affect the bonding capacity
and the company’s ability to survive?
-
How is the
future management team being developed to take over on an interim or
permanent basis?
-
How will
future debt be secured? In many companies, you are the personal
guarantor for the debt as well as for its bonding. The
successor owners need to understand that they may have to assume this
responsibility.
Strategic
Opportunities
The succession
planning process is an opportunity for new ideas to surface and for
long-term goals and objectives to be developed and endorsed by management
and family. In the planning process, individuals not previously recognized
for their talents and abilities may emerge. Similarly, the discipline of
formalizing a plan will reveal differences of opinion and potential
rivalries that can be addressed now, rather than later.
Peace of Mind
Once your
succession plan is formalized and everyone knows his or her role and
responsibilities, there is one final dividend to you: peace of mind. With
all participants knowledgeable and prepared, you can rest easy, knowing your
intentions will be carried out.
