Deloitte: Business Succession Planning Series: Vol. 1 The Need for Planning
A Plan for Permanence
No one goes through the work, risk, and sacrifice of starting a business without hoping it will last. Building value that endures is the dream that motivates entrepreneurs. Yet in many businesses, too little of that work goes into determining who will take over when the founders leave the stage.
According to the National Association of Corporate Directors, fewer than one in four private company boards say they have a formal succession plan in place.1 There isn’t a good reason to justify the common oversight of not planning for business succession. Some business leaders are too caught up in the challenges of the present. Some have a subconscious aversion to the reality that they won’t be around forever, or assume succession will work itself out naturally. Others are aware of the task’s true complexity and find it overwhelming. Ultimately, however, the reasons people avoid succession planning aren’t as important as the reasons they should embrace it.
For a business, working without a succession plan can invite disruption, uncertainty, and conflict, and endangers future competitiveness. For companies that are family-owned or controlled, the issue of succession also introduces deeply emotional personal issues and may widen the circle of stakeholders to include non-employee family members.
The next 10 to 15 years may bring substantial transfers of wealth through business ownership handoffs across generations and other new ownership structures. The long-term survival of those businesses, and the preservation of the wealth they have built, will depend upon a clear and early focus on strategic succession planning.
This paper outlining the need for business succession planning is the first in a series. Upcoming companion volumes will focus on business continuity and growth, personal wealth management, creating and maintaining a legacy, family dynamics and business governance, and the role of the advisor. Together, these studies form a library that can help business leaders identify and overcome the challenges that stand between them and an orderly transition of the management and ownership of their companies.
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