Years ago, one of my great mates died tragically and unexpectedly. He was 53 years old, fit, healthy and should have had another 30 or 40 years left in that amazing tank. Everyone was devastated by the sudden loss, especially his family.
Luckily, as a client, he had been through our Estate Planning process. Our (then) professional team and the lawyers had spent months in designing the best structures and wills to protect and provide for the future. It was perfect. In fact, it was textbook perfect. But in all that clever planning, no one actually expected the client to die.
But he did. And our planning just wasn’t enough. For lots of reasons. And it changed our thinking forever.
The business was simply not prepared for the suddenness of the change. How do you replace a person that is larger than life itself? Everyone is grieving and can hardly do their jobs. They are worried about the future and indeed… their own jobs. There had never been consideration of short-term management, survival strategies, or even dealing with the staff, the suppliers and the customers.
Nor was there any consideration of what to do with the business in the event of a disaster. Should the business now be preserved for the children to join it one day? What if that is not their eventual wish? Should the business be sold? To whom? How do you go about this when the most important person in the business is now missing?
Perhaps the business should be run by his grieving widow? We have only seen this executed successfully a couple of times and only where there has been a fabulous GM already running the business. But this is a rare situation and a potentially risky strategy heavily reliant on one non-family person.
On the other hand, we have also seen a surviving spouse (that includes both widows and widowers) step up and run a business without any knowledge of what to do. All too often with devastating results.
I remember asking one person why they decided to continue to run the once successful business and they said, “my spouse would have wanted me to”. I quietly disagreed. That business was just too complex and too hard to run. No wonder it was now so desperate.
Perhaps the best question to ask is “what would your partner (most often the founder) have done in this situation”? And the best person to ask is the very person who unfortunately can no longer advise what to do.
Which is the point of this article.
The right person to drive the ‘other half’ of the Estate Planning process is the owner.
The time to do this is long before they die. While they are still in a position of control. While they can make effective long-term strategic changes in structure, management, skills, reporting, control and resilience. While sensible decisions are free from emotion and tears. While it is easier to professionalise and make the business less owner-dependant.
This is the heart of what ultimately becomes Succession Planning. Succession Planning doesn’t come from a textbook. It comes from years of practical hands-on experience in a wide variety of scenarios and circumstances. And frankly, it comes with grey hair.
Oddly enough, most business owners know they need this, yet very few business owners have actually undertaken a Succession Plan. And surprisingly, most Succession Plans are fully completed and executed while the owner is still alive… so it’s not just about dying on the job.
In our experience, the best plans include the owner and their spouse, often including an overlay into the key components of the business, the financials, the Estate Plan and the children. Properly facilitated, they take less than a month, involve no more than two workshop sessions (plus a few other shorter interviews) and deliver a clear picture of the future, whether that future is with or without the owner being alive.
Years ago, I was appointed (along with our then partner Mark Cummings) to run Succession Plans for the Family Owned Business clients of one of the big banks. It was probably the busiest 5 years of our lives. During that time, we undertook literally hundreds of plans for every type of client imaginable… from far sighted 50-year-old business owners to cranky 85-year old’s who now believed they would never die.
And we came across a few cases of businesses trying to do a Succession Plan after the owner had already died. Sadly, there was not much we could now do amongst all that chaos and confusion.
Facilitating Succession Plans remains one of the most enjoyable and rewarding planning processes that we undertake. Nothing more satisfying than hearing the spouse of the owner say to the owner… “why didn’t we do this years ago honey”.
Well, I guess they hadn’t come across Alp McNamara yet.
Looking forward to hearing from you!
Chris Alp
Business Specialist Partner