mk remodeling glenview framing a second floor addition hainesville bathroom remodels for small bathrooms bannockburn aj construction and remodeling gambrel house additions .. Chicago Drug testing

Succession Planning: Problems Getting Started

A survey released by the American Institute of Certified Public Accountants in the spring of 2005 illustrates a widespread problem on the lack of succession planning [deciding who will take over running the firm when the current managers die or retire]. The survey found that 60% of responding certified public accountant (CPA) firms have owners who are in the 55-to-62-year-old age bracket, and more than half (56%) have at least one partner who will retire in the next five years. However, according to the survey, 81% of these firms still do not have a written succession plan in place. Among those firms with annual revenues under $150,000, the percentage rose to 96%. If we polled small businesses in other fields, the percentages would be comparable: around 80% of small business owners have no succession plans.

Similarly, the Canadian Federation of Independent Business (CFIB) reports about 40% of small and medium business owners in Canada plan to leave or retire in the next five years, and 70% plan to leave or retire within 10 years. However, roughly two-thirds of the 4,300 Canadian businesses that responded to the federation's survey have completed no succession planning. Small and medium businesses account for about half of the jobs in the Canadian economy, and potentially more than two million jobs could be at risk to inadequate succession planning.

For many of these small and medium business owners, the practices they have built up are their most valuable assets as well as their primary retirement assets. But these owners believe they have plenty of time to arrange for succession. Many business owners put off dealing with succession because it is the least urgent matter on their plate. Too often business owners cannot stand the idea of letting go of an entity they created and for which they toiled to achieve success. Apparently, these small and medium business owners need assistance both in formulating plans and in actual transitioning to future managers and owners of the firm.

Succession planning, like tax planning, is just good common sense and should be a natural part of good business practices. As soon as business owners take out life insurance policies to protect their assets for dependents left behind, they need to think of succession planning. If business owners have children who do not wish to follow in their parent's business, then the business owners need to think realistically about the price they would be willing to sell the business to outsiders. In one sense, these business owners who plan to sell to outsiders are lucky that they can avoid the emotionally divisive issue of having to select a business heir from competing adult children or competing managers.

Succession planning would not be needed if the owner intended to wind down operations upon his retirement, but only 4% of the Canadian small and medium businesses that responded to the CFIB plan to close down their firms. The response from American small business owners would probably be similar. Yet without adequate succession planning, the firms could be in disarray upon the owners' retirement and unfortunately the businesses might fade away.

Inevitably, succession planning forces many owners to agonize over whether to pass on their business to family, employees, or a private buyer. They also worry about selling at the right price and finding a buyer who will treat the business and staff well. All of this planning occurs at a time when they are considering retirement and the other changes in their life that will occur when they are no longer running a business. As a rule of thumb, business should start developing a succession plan at least five years before the owner hopes to step aside or as soon as the corporation acquires capital assets with significant value. It can take up to two years to sell a small business.

About 30 per cent of successions feature the previous owner advancing a loan or seller financing to the buyer, because small business bank loans are difficult to get from a bank. When there are no family members interested, small business owners should consider handling their succession through life insurance. But few small and medium business owners have that kind of foresight.

Dr. Michael A. S. Guth, Ph.D., J.D., is a risk management consultant and practicing attorney at law based in Oak Ridge, Tennessee. In addition, Dr. Guth is a financial quant and former investment banker, having worked for Credit Suisse First Boston and Deutsche Bank in London and Frankfurt. He specializes in developing investment strategies and strategic plans for small and medium-sized companies, as well as mergers and acquisitions for large corporate clients. For five years, he consulted to the electric power and gas industry in the USA, and even managed the Middle Office (financial risk control) groups for two trading floors.

Dr. Guth has taught over 30 courses on-line at the undergraduate and graduate level on topics ranging from Managerial Economics to Strategic Management to Business Law. He can be reached through web page http://riskmgmt.biz/economist.htm

In The News:

To Go or No Go, That Is The Question

Last week we talked about a few of the ways... Read More

Writing Your Business Plan is Actually Storytelling

Storytelling and writing a business plan actually go hand in... Read More

Becoming Wise - Wild & Free - Writing A Successful Business Plan - Part 2 - Do It In Steps

So you've decided to write your own business plan because... Read More

Do You Have A Customer Identity Crisis?

The trick is to determine what uniquely identifies your best... Read More

Business Plan Financial Projections: Stop Worrying About Being Right...

Business plan financial projections seem daunting because they are so... Read More

The 7 Critical Steps to Formulating Your Annual Strategic Business Plan

Businesses tend to avoid doing their annual business plan thinking... Read More

Pave the Way to a Successful Strategic Plan

Many very successful business owners may never have had a... Read More

2 Simple Steps Before Starting Your Business

There is so much small business information available today that... Read More

Planning For The Slow Season Of Your Business To Increase Sales

Every business experiences slower periods. For some, they sell more... Read More

Planning for Success

Business planning is widely acknowledged as one of the keys... Read More

The Top Five Reasons Strategic Plans Fail

"Most great plans aren't. They are just nice, high-level ideas."That's... Read More

Dotcom Business Plans Archive Project

One of the most important initiatives in the domain of... Read More

Business Results - Four Critical Success Factors

Scenario OneDuring a recent presentation, a business owner was given... Read More

Top 10 Tips to Create A Business Plan! (For People Who Hate Business Plans)

One of the key challenges for any business is to... Read More

When Do I Need To Hire A Business Plan Consultant

Every new business owner knows that a business plan is... Read More

Consolidation in the Software Industry is Hardly New: Obsess About It or Risk Losing it All

Some analysts credit [Larry] Ellison with anticipating the consolidation in... Read More

A Backup To The Internet Is Vital & Now Cost Effective

It doesn't take a Terrorist Act, Tsunami or Earthquake to... Read More

Insurance Requirements in Franchised Companies

Franchised companies often require what some believe to be excessive... Read More

Breaking the Growth Barriers in the Information Technology and Software Sector

There's nothing automatic about corporate growth, particularly in the information... Read More

Have You Identified the Enemy?

One of the most powerful driving forces in human nature... Read More

SWOT Analysis Is No Magic 8 Ball

Q: A key investor in my business has suggested that... Read More

Mastermind Your Way to Success

What do Mark Victor Hansen, Robert Allen, Anthony Robbins, Andrew... Read More

Why Do a Business Plan?

To Grow (Catapult) Your Business That's Why.When it's in your... Read More

Be Like Bill - Think!

Twice a year, Bill Gates goes to a remote island... Read More

Executive Summary for Business Plans of Franchisees

Writing a business plan for a franchised outlet of a... Read More

induction street light fixtures led commercial lighting fixtures Pete's produce ..
induction street light fixtures led commercial lighting fixtures Pete's produce ..