What’s Next for Your Business?


Jennifer Riesenberg, CPA, Senior Manager, BKD, LLP

Many surveys show that family owned businesses view succession and continuity planning as one of their most important issues.  According to a 2015 succession planning survey performed by BKD, LLP, the majority of family owned businesses will experience a change in ownership and/or a change in leadership within the next 10 years.  With the baby boom generation that is at or near retirement, there is an above average wave of ownership and leadership changes expected in the majority of privately held companies in the near term.  Even still, the same 2015 study showed that more than two thirds of most family owned businesses have not developed a formal and written succession plan.

How well business owners manage and prepare for a succession event may be the decisive factor in the overall financial success of their business and its stakeholders.  Wisely managing this event will help business owners capitalize on the fruits of their labor.  Failing to plan for this event could throw their future into a tailspin. 

Developing a holistic succession and continuity plan that protects a business owner’s family can provide peace of mind and reassurance to themselves and all stakeholders.  Given the obvious need and benefits of developing a succession plan, why do so many fail to do so?  First, day-to-day operational demands seem more urgent than “long-term” succession planning.  Second, more often than not, leadership has not been through a succession event, and the lack of knowledge and experience related to developing a plan can easily lead to procrastination.

It’s also important to remember that not all succession plans are equal, and while a well-developed succession plan can perpetuate success, a poorly designed succession plan can lead to failure.  Some common reasons why succession plans fail include:

  • A failure to consider the perspective of all stakeholders, including shareholders, leadership and family
  • Developing a plan by starting with a review of liquidity options, instead of developing goals and objectives first
  • A singular focus on tax driven planning versus goal driven planning
  • Failure to resolve conflict within business or among stakeholders
  • Failure to pick and/or train a qualified and capable leader(s) to succeed current leadership

An effective succession plan should include a thoughtful approach that accounts for the interplay between business, ownership and family.  If done correctly, a succession plan will align with a business owner’s goals while addressing contingencies, gaps and opportunities.  As previously mentioned, many business owners fail to address succession due to lack of time and experience.  Therefore, we suggest beginning the process by identifying a lead advisor who can manage planning and implementation.  This will help a business owner efficiently use their time to develop a thoughtful and comprehensive plan.  This advisor should have experience in succession planning and a solid understanding of the interplay between the business, ownership and family.  This advisor also should have a developed process and toolkit for navigating these relationships.  Also, the right advisor will readily seek assistance from other qualified advisors at various points in this process. The lead advisor won’t be an expert in all fields (if they claim to be, we would exercise extreme caution) but will be able to identify potential needs and access the right professionals.

The brevity of this article limits in-depth review of the issues and topics related to the development of an effective succession plan.  However, here is one final thought—an effective succession planning is a never-ending process that requires re-evaluation as circumstances change.  Succession planning likely will always be a concern (as it should be), but having a plan in place will hopefully give a business owner the peace of mind to get a good night’s rest.

The Goering Center’s succession planning program, the Next Generation Institute, is enrolling now.  If you would like more information, please contact Steve McLemore at 513.556.7409.

This article is for general information purposes only and is not to be considered as legal advice. This information was written by qualified, experienced BKD professionals, but applying this information to your particular situation requires careful consideration of your specific facts and circumstances. Consult your BKD advisor or legal counsel before acting on any matter covered in this update.