Five succession planning tips

Fuller Landau team • February 06, 2015

A solid company succession plan not only helps you sleep nights; it’s also a retention and motivation tool. It is important to consider the emotional consequences of these decisions as they can affect how smoothly the transition occurs.

You know that building a trucking business requires hard work, dedication and sacrifice. And that’s exactly why succession planning is so important: to maintain and extend the success of your business into the future. It’s a way to protect all your hard work and allow you to maximize your proceeds in the event of retirement, illness, disability or death. It’s also a way to motivate, retain and develop good employees.

In a nutshell, succession planning is about identifying and developing your top talent to take on senior positions. If you are not doing this, you are risking not having a strong team in place ready to step in when you need them to. While on the face of it, most business leaders understand how critical succession planning is, the reality is they are not devoting the time and resources to make it happen and as a result they are being reactive and having to scramble when there are unexpected departures.

Part of the problem is that many owners feel overwhelmed with the scope of the task. Here, we share our best lessons learned and present what you need to know and do to create a comprehensive succession plan:

1. Outline Your Objectives for the Succession Plan
Do you want a clean exit from the business without any continuing day-to-day responsibilities or do you want to transition your involvement over a period of time? This will impact the timeframe for the plan and how you execute it.

2. Determine What Your Business is Worth
A Chartered Business Valuator (CBV) will help you arrive at the fair market value of your business and give you a benchmark of what your business is worth. They can also help you maximize the value of your business by increasing sales, cutting costs and ensuring the balance sheet is optimized.

3. Identify Likely Successors
Family members, employees and third parties are all possible successors of a business. Special attention should be given to situations where some, but not all, children are identified as the likely successors of a business. Succession plans have an increased risk of failure when injustices, whether actual or perceived, arise from the transition of a business to one child and not another. It is important to consider the emotional consequences of these decisions as they can affect how smoothly the transition occurs. In the event that you decide your business is better suited to be sold to a third party, create a list of possible purchasers who you believe may wish to acquire your company. It is important to include any competitors on this list who may be willing to pay a premium to acquire your company’s assets and in particular your customers.

4. Understand the Legal and Tax Implications of Your Plan
It is important to seek the assistance of tax and legal professionals in order to ensure your tax bill is minimized and no unforeseen legal complications arise when you want to exit the business.

5. Do Not Delay
It’s important to start planning early as it may take several years to implement a comprehensive succession plan.

The key objective in a successful succession plan is to ensure the smooth transition of your business. In order to maximize the value of your business, focus on how your departure will impact your business’s relationships with its customers, suppliers and employees and leave the valuation and tax planning issues that are integral to a succession plan to your trusted professionals.


This post was originally published in Today’s Trucking, October 2014 issue. Click to read the October 2014 issue (p. 29).


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