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08 Dec 2011

Meandering unsuccessfully through your succession planning

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Owner-managers stuck in the humdrum of working ‘in’ their business, not ‘on’ it, have several choices. We all know that thousands of ‘baby-boom’ owner-managers will need to transition their business within the next 5 years. However, I am staggered by the lack of succession planning activity going on. I believe I have identified two principle reasons behind all this meandering to a successful exit.

  1. Firstly, the owner has accidently adopted a cost-leader strategy that isn’t a winning one.
  2. The nominalisation ‘succession planning’ has no concrete meaning

My business mentor and friend, Phil Symchych, has written a great article on Working from Instinct vs. Working from Insight. If you want to diagnose why you or your client has fallen into a cost-leader strategy then read his article here.

The term ‘succession planning’ has no concrete meaning. To use a phrase from someone whose work I admire enormously, Alan Parker would say, “Nominalisations are generalisations and nouns that you cannot touch. They are nouns that you cannot put in a wheel-barrow”.

Your generalist business advisors, lawyers and accountants have over-hyped and over-sold the promise of what a ‘succession plan’ will deliver.

My definition of ‘succession-planning’ as applied to owner-managed businesses is this:

  • Transitioning ownership to cash-up for retirement

Transitioning management is fundamental and it is not part of my defintion of ‘succession-planning’. Put simply, a solid business that will maximise the cash-up amount will already have transitioned management and be Working from Insight. And so, the transition event, the exit, call it what you will, is about an ownership transition and cash.

There is nothing new about the corporate finance advisory services that fulfil this goal. The choice of meandering unsuccessfully or speeding through the finishing line at 200 mph is up to you and your client.

About the Author

Michael is an investment director and provider of growth capital to small and medium sized businesses. He is also a corporate finance advisor with a chartered accountancy and management consulting background having worked for both KPMG and PricewaterhouseCoopers. If you would like to buy a business, sell your business or grow your business, and need help with finance, negotiations, or strategic direction, then call Michael on +61 (0)488 073 175