Succession planning: something for everyone

Often succession planning comes up in conversation in the context of a board needing to ensure the availability of a successor in case a chief executive officer or some other key executive is lost.  Prominent examples that come to mind include Apple and Steve Jobs; and Berkshire Hathaway and Warren Buffet.

In fact, succession planning is something that is a requirement of businesses of all shapes and sizes.  Whether it be a single practitioner consultancy, a medical practice, a family business, a garage startup, a corporation with hundreds of staff, turning over thousands or millions, all must answer the question that succession planning poses.

Take two young men who set up a cloud based software application.  In those early years they saw each other as equal partners, pledging that they would be paid equally and dividends granted on the same basis.

After a few years, they’d built a reasonably successful business annually turning over several million a year.  All with a staff of less than a dozen.  But over those years circumstances have changed, they now have children, one of them has emerged as the business leader and the other is distracted by a troubled family life.

The leader is pulling twice the time of the other and feels he is carrying his partner.  He is thinking about other projects he could start and considers a trade sale.  A clean break and a new start.

But its not that easy.  Some acquirers will require him to remain for a period of time.  Others will require a non-compete clause for a fixed period.   The value of the business could be discounted if he has not established an internal successor who could provide back up leadership.  But there isn’t anyone else.    Few systems are documented.  Most everything is in everybody’s heads.

How do you think this story will end?

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