Conversation with William F. Rucci, Jr., partner of Russell Bedford International.
When you talk about "carrying torches" in business, you refer to the concept of business succession. What exactly is business succession?
It's a process of planning what happens to your business when you can't run it anymore. Business owners have put so much into building a successful business, and when the time comes to retire, to hand control over to someone else, it turns out to be extremely difficult. Family dynamics, legal, financial, tax issues enter. As a result, many company owners try to avoid the subject of inheritance. That's a mistake.
Does the topic of business succession attract attention in the business community right now?
It's a serious problem that's gonna get bigger. Private companies will enter the period of mass leadership transformation in the next decade. Every day around 8,000 people finish 65 years, and conducted surveys show that seven out of ten corporate owners in the USA expect that in the coming 10 years will end. It's only a matter of time before the owners are forced to answer important questions about the future of their company.
What is the danger if we are not interested in this problem?
The stakes may be high. Without proper planning, we can face serious legal and tax consequences for ourselves and for our family. If we take care of business succession, it can lay the basis for a smooth and smooth takeover. Sometimes you can almost hear in your head: “Retire? I might as well die. No one can run my business as well as I can. My children will ruin everything I have built.” These are understandable concerns that may, however, impede process planning.
So, what are the steps that the company's owner should take to implement an effective company succession plan?
Building a plan is best to start early enough. Create a support group. Identify and communicate your targets. Design, develop and monitor your succession plan
Why is it important to start early?
Implementation of the plan takes about five years. Add time to this to explore the area of alternatives and then this time horizon becomes even longer. However, there may be an unexpected illness or death, which will make this confrontation with reality necessary much earlier.
It is also important to give sufficient time to stakeholders and family members. So they can adapt and accept the plans. Without their support, you risk fighting in the family and the company will lose key employees. Surely you yourself want to spend enough time to choose and develop your successor before you step down.
What do you mean, "create a support group"?
Even the simplest plan requires financial, financial, legal and tax considerations. Then join your accountant's team, as well as your lawyer's. Family and key employees are also important if the plan is to be accepted and if it is to succeed. Your accountant is probably the best person to start a team from tax and financial planning – these analyses are extremely important parts of the succession planning process.
If we're talking about a family company, are there any traps that the owner of the succession has to watch out for?
Well, choosing a successor can be stressful for any owner, the more so if you have a few children. Most parents want to treat their children equally, so if the company is not one the property of the family, the owner may decide to allocate various assets to children who are not active in business.
If the owner cannot identify the successor, which sometimes happens, it may be time to decide whether to sell or to end the business. Of course, the best way to deal with this kind of threat is to explain personal and business goals.
And it is precisely the support team that can help in articleing them, as well as overcoming psychological barriers that often occur when we are to establish such personal matters. If key employees and family members understand your intentions, they are more likely to support your plan.
What happens next?
After considering all alternatives, have your plan of succession in writing. But a good plan must be flexible. It allows you to react quickly if reality throws some logs at your feet. Occasional meetings with the advisory team will help you make sure your plan remains valid. Communication between key stakeholders also helps.
Source: Businness World Russell Bedford International: