So far, we’ve killed off two business owners and left another one with a disability. In the remaining Business Killers installments, the owners are alive and healthy – but they’re still capable of making potentially fatal mistakes.
An art gallery is owned and operated by an older man whose daughter works for him. The scene opens with the daughter mentioning that her friend Jeff just found out that the family business he had planned to take over had been sold. Although the intention was to keep it in the family, Jeff’s father had put all his money into the business and needed to sell to fund his retirement.
The daughter is concerned because her own father has reinvested most of the art gallery profits into the business. She’s worried that she could end up like Jeff and urges her father to develop a viable succession plan for the gallery. But he isn’t interested in taking the time to do so, and tells her not to worry. Besides, he says, hasn’t he always taken care of her? Famous last words…
WHY YOU NEED A SUCCESSION PLAN
Most owners assume they will have time for business planning later. After all, they are running a business which can demand all of their attention. But as noted in the previous scenarios, not planning for business succession – especially in family-owned companies – is one of the major reasons why businesses fail when the founder leaves.
Not having a clear succession plan creates ambiguity at best and a vicious power struggle or inability to continue operating the company at worst. Founders need to have a reliable successor who is already groomed to take over. This means someone who has the technical and managerial skills to run the business. It also means transitioning key vendor and customer relationships ahead of time to ensure continuity of operations without the founder.
As we’ll explore in more detail in the next post, a family business owner also needs to ensure that he or she is financially able to retire while preserving jobs for other family members who want to continue working in the business.
This is so true, Jim. Grooming future leaders – family or otherwise – can’t start too soon. Time and again, I’ve found that business owners and firm owners wait until they’re ready to retire before they begin grooming a successor. As a result, they have to postpone their retirement or, as you point out, the business fails after their departure. Your clients are lucky to have you reminding them to start now! As Steven Covey said, “Begin with the end in mind.”
Jo, thanks for your insights and feedback. We appreciate readers checking in and sharing their thoughts.