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Bell Had Watson: Business Succession Isn’t All About You

Succession planning begins with understanding the goals and needs of all stakeholders

By Frank Caputo

It’s your business, right?

You had the idea. You had the initiative. You got it off the ground and shaped it into the thriving entity—the thing full of life and substance—it is today.

Now, after years of sweat and tears, and maybe even some blood, you know your progeny is set to outlast you. It’s time to think about what—and who—is next. So, when it comes to determining ownership, leadership and management succession, it’s still all about you, right?

Uh no, not really!

While you may have inspired and led the creation of your brainchild, it’s unlikely that you built it all by yourself. It’s exceedingly rare, if not entirely impossible, for one person to have built anything of real value in full isolation. After all, your business thrives not only because of your product—what you sell—but also because of the people who sell it, service it and run the operations behind it.

Even Alexander Graham Bell had Thomas Watson. Ben has Jerry. And even at a distance from the business, an uninvolved spouse or life partner still has an enormous emotional stake. They raised a glass during the good times. And embraced you as you struggled. They deserve more than just passing consideration, as do your leaders, managers, customers and vendors.

But if it’s not all about you, where and how do you begin to think about succession? As is the case with many of life’s good fortunes, you begin by considering others first, not just yourself.

Succession planning … where to begin

A good succession plan begins with identifying key stakeholders, the people who have contributed to your success. The starting point is a simple but comprehensive list of:

  • Owners/shareholders
  • Family members that will be significantly affected by the decisions related to succession, whether involved in the business or not
  • Key employees, who if no longer part of the company, will have a major impact on its future success

The purpose of the list is to understand what these people are thinking in terms of the future. What is their vision of the ultimate outcome of the succession process—not just for the company, but for themselves? Do they want to be a part of the post-succession business? What are their aspirations with respect to possible ownership, leadership or management roles?

These and other questions are topics of interviews conducted, ideally, by an experienced and unbiased succession planner. Everything is heard and put on the table—no exclusions, no judgement.

The numbers … business and personal

Clearly, the financials—the numbers—are critically important. Nothing works without the financial resources to make it happen, which is exactly the point. But the numbers won’t make sense without first having the context of your and your stakeholders’ goals and desires.

The numerical perspective looks at the business in terms of its viability—its financial ability—to support the owner’s personal life goals and lifestyle post-exit, through life expectancy. Where is the business today financially? What are its financial prospects for the future? Does the financial picture support the needs of the owner and other stakeholders while not compromising the ability of the business to continue growing?

These are not simple yes/no questions. Their answers come in the form of a comprehensive and realistic financial plan that aligns with the desired outcome.

Identifying leadership/management skillsets: Who’s got it?

Identifying capable successors involves assessing the knowledge, skillsets and temperament of the next generation of leadership and management. Not unlike developing a stakeholders list, understanding the successor pipeline is critical.

Who’s there? Who’s ready? Who’s not? Who has potential—and aspires—to be an effective leader or manager?

But the question who? isn’t enough. There’s also what. What characteristics and measurables are required for succeeding leaders and managers? The qualities of the current owner are a good starting point. But will those qualities be the same ones that can continue to build the business 10 or 20 years from now?

Unbiased support is particularly helpful in identifying leadership qualities and assessing knowledge, skillsets and temperament. Personality and psychological assessments can be helpful, too. And let’s not exclude outside talent. If an unbiased assessment determines that strong internal candidates—despite their apparent drive and desire—are lacking, potential leaders and managers outside of the company also should be considered.

A note on the family factor—family members who are eager to assume ownership, or a leadership or management role: surnames only should not qualify as valid successor criteria. Family members also should have to make the cut.

Understanding relationships, operations & culture

It is vitally important to understand key relationships and who in the business owns the relationships with customers, suppliers, key employees and other significant external audiences. What are those relationships like and how are you going to facilitate their continued success?

Business operations also are a focus—examining and understanding the operations of the business to ensure that it can continue to flourish to support the desired plan for succession.

Then there is company culture—the Secret Sauce that drives teamwork and a focus on customer satisfaction. Maintaining the most important aspects of the culture post-succession will be critical to the company’s viability.

Succession is about alignment

At the end of the day, a strong succession plan is all about alignment—not just within but between the numerical, operational, and relational aspects of the business. Alignment creates clarity and an important emotional anchor that set succession in motion, even if the owner’s departure is still several years away.

Begin now by asking the question … Who’s your Watson?

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August 9, 2022 in Estate Tax, Family Protection, Financial Security, Know your story, Legacy Planning, Life Insurance, Philanthropy, Tax

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