passing-baton

The situation

Your client owns a successful trucking company. He’s near retirement age, but shows no signs of slowing down.

He’s in the office every day, works long hours and obsesses over everything from the quarterly results to the cost of the next fuel requisition. He’s stubbornly holding on, but you know he can’t do it forever.

He needs to figure out how the business will run without him. How do you explain this to your client without raising his defences?

Succession planning

Succession planning is essential to a business’s survival. Once your client’s ready to talk about letting go, help him identify his successor. This allows an aging owner to retire on short notice; for instance, if a sudden health issue arises.

If your client’s running a family business, talk to him first about which relatives have the right skills, and whom he sees as a natural fit.

Then, meet with those candidates. Sometimes, a chosen successor doesn’t want to change careers. Also, determine whether a sale is an option, because sometimes the family simply wants the cash from its sale.

Focus on the benefits of having a succession plan, rather than the consequences of not having one.

Ask

What kind of legacy do you want to leave?

Not

Do you want to see your company crumble after you’re too old to run it?

Ask

If you were to take more vacations, how would you want the business to operate while you’re away?

Not

Who will run the show after you’re in a nursing home?

Ask

What do you want your retirement lifestyle to look like?

Not

Do you think you’ll be bored when you retire?

Then, he’ll need to create a leadership development plan with specific job requirements for the successor; work with that person to develop a strategic plan for the business; and then settle the terms of ownership transfer.

If the client’s selling the business outright, he’ll need to prep the company by documenting processes, identifying and approaching potential buyers, taking bids, doing due diligence, and, in some cases, communicating with customers to ensure the business remains viable.

(For instance, the owner of a specialty bakery may tell customers that she will carefully hand over all recipes to the new owners, and she’ll stick around to oversee the transition.)

Once a plan’s in place, bring together accountants, lawyers and other specialists to help with tax, estate and insurance planning. They can help minimize the amount of tax paid on the sale, update the will, ensure the family is protected if the sale falls through, and help with further retirement income planning.

5 steps to prepping a successor

Are your clients business owners?

Check out our special succession package at advisor.ca/succession

Rosemary Smyth, a Victoria-based coach with Rosemary Smyth & Associates and author of 101 Success Tips and Strategies for Financial Advisors

Originally published in Advisor's Edge