Here are five tell-tale signs that your business may have a dose of ‘succession sickness’:
- The prevailing view among owners is that the business has little or no value;
- Future ownership and succession are never discussed;
- Future directions and plans are rarely acted upon;
- Potential successors come and go (in frustration) or assume roles without authority or accountability;
- Safety strategies – in the event of a key person’s unexpected death or debilitating physical or mental illness – are virtually non-existent.
Does your business have any of these symptoms? If so, read on!
So we know the symptoms of succession sickness, but what is the cause?
In my experience, the critical factor is usually poor communication.
The key players in the business, who have often partnered and worked together through thick and thin, find it difficult to openly and transparently talk to each other about succession.
We’ve talked about the dangers of poor communication in previous blogs related to family business succession, but an unwillingness to have potentially difficult discussions about the future is not limited to family members who work together.
A client’s story
In the past six months I’ve worked with a client who has been in a business partnership for over 30 years. Together, the business partners have built a company in an industrial services sector in regional Queensland.
The business’ three directors are all equal owners and the company averages about $15m turnover and $1.75m profit.
One director signalled their intention to exit six years ago.
Another director wants to retire and have their son take the reins.
The remaining director has an eight-year horizon to continue running and building the business.
It has taken them five years to get together in one room to have a serious, open, informed and productive discussion about their future succession plans, business value and forward options.
They had consciously and subconsciously been avoiding the situation.
In the case of these business owners, upon absolute frustration one of the directors decided to engage an advisor to be an outside catalyst to facilitate the process. I’m happy to report the discussions have gone relatively smoothly – no one has fallen out of love!
Yes, these sorts of discussions can be difficult, emotional and complex, but with open communication and independent and robust advice, plans can be devised, agreed and enacted to help achieve all parties’ objectives in a fair and reasonable manner.
If you would like support with any aspect of succession planning for your business, contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.