JULY 2022
How to plan and set up for future leadership
There was considerable dialogue around best practices and lessons learned regarding succession planning. Succession planning is important for any business, but it is typically not an urgent consideration. As such, it is easy to make the mistake of postponing it. Unfortunately, when things go wrong without adequate planning, the transition can be daunting. After recently having bypass surgery, one attendee was reminded of the importance of preparation for succession.
Another attendee came back to the business after their father became ill and had to learn on the fly. By having a plan in place, the transition can be much smoother.
Several participants emphasized the importance of starting with conversations. Those dialogues can be awkward but necessary, looking at scenarios involving death or divorce, or if siblings or children subsequently will leave the business or wish to return to it, for example. Another concern might be which role each child will assume if there are multiple children in various leadership roles already. “It's a whole lot easier to have those uncomfortable conversations today than it will be when it's too late,” one attendee advised. “And now you're under the gun, and it's time to have them.”
When talking about succession, it is important to see it through the lens of the other or in someone else’s shoes. Each generation will have a different vision of how things should move forward, and it is crucial to find common ground.
One participant shared that they had detailed contracts that family members had signed, covering a number of contingencies such as company share allocation, how children come into the business, as well as a course of action regarding death or divorce. Several attendees noted that there are professionals (lawyers, CPAs, insurance brokers) who have expertise in succession planning and can help.
One attendee stressed that getting a company ready for sale or planning for a succession often takes longer than people think. Don’t assume you will get everything ready in six months.
After a succession plan has been established, a “buy-sell” agreement is typically crafted by a lawyer. Subsequently, a knowledgeable
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insurance broker can help fund the succession through life insurance. Insurance can provide funding to pay someone out in the case of death.