RetailerNOW June 2016

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Succession Planning

It’s not a four-letter word, but retailers sure treat it like one. Starting this month, nine reasons why you need to face the future. By Wayne Rivers


t’s gotten so the big financial services companies produce a report about family businesses two or three times a year. They almost always tell the same story: Family businesses are woefully unprepared for management succession. They’re somewhat under-prepared for ownership succession. Few have adopted formal business and family governance practices. To make matters worse, the senior generation has no plan to retire, which creates a fair bit of uncertainty for subsequent generations in the business. Sound familiar? So why don’t family businesses, given the fact that the do-or-die test of their long-term success is at issue, undertake more rigorous, thoughtful, and productive business succession planning? There are a host of reasons, but there are nine which continually rise to the top of the heap. We’ll tackle three of the reasons each of the next three months in this space. By the end of summer (if not sooner), you’ll have no reason not to have your affairs in order!

1. It’s not urgent For a healthy, relatively energetic 65-year-old with employee children ages 40, 38, and 36, there are many, many pressing events demanding his attention every day. Succession planning is high on his list of importance, but let’s be honest here, succession planning rarely makes it to the top of his urgent to-do list. It was a goal to undertake succession planning in 2013, but for some reason we can’t quite recall, it didn’t happen. So the goal was pushed back to 2014. Same goal, same story—no movement whatsoever. Last year things were just too crazy what with furniture market and having to hire two new sales associates. And then there was that accident on the job site, and an unexpected lawsuit came up which required plenty of time and money. The patriarch says, “We absolute, positively have to take care


JUNE | 2016

of succession planning—and we will next year.” And so on, and so on. The fact is the big picture, multi-year process of succession planning actually does lend itself to being pushed back a week, a month, a year. Business succession planning is rarely urgent—except when it is, and then, or course, it’s too late. A corollary to the never-urgent issue is the fact that there’s never any time. I don’t need to tell you the life of a home furnishings store owner—especially in the years following The Great Recession—is a hectic, fast-paced existence where she moves from one task to the next, one meeting to the next, one phone call to the next, and one fire to put out to the next. The lack of downtime—time to simply put one’s feet up and relax—precludes deep, introspective business thinking and planning about succession. To gain traction, family business leaders and next-generation family members must make succession planning a priority and schedule sufficient time, money, and energy as they would towards completing any other high impact project. Look at this another way in the long run, what project is more important to your business than planning for the future success of your business and family? Another way to look at it: Every day you’re looking at the short-term future of your business’s success. Why not invest just as much energy into your business’s long-term success?

2. The focus on tax avoidance and “Drop Dead Plans” creates a false sense of security When we started helping family businesses plan for a better future 27 years ago, the state of estate planning among them was— how shall I put this politely? —woeful. Today, due to a concerted education effort on the parts of the legal and financial services communities, estate plans are much better thought out and more robust than ever before. And that, in and of itself, presents a problem. Almost all estate

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