Busi­ness own­ers ad­vised to plan who takes helm af­ter they’re gone

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - JOYCE M. ROSEN­BERG

NEW YORK — Jes­sica Sayles is think­ing about who might take over for her when she re­tires at age 55 from the ac­count­ing firm where she is manag­ing part­ner — even though that’s still 21 years away.

“I feel that a good por­tion of my job is to find my suc­ces­sor,” said Sayles, who hopes to teach a younger as­so­ciate to man­age Houldsworth, Russo & Co in Las Ve­gas.

Suc­ces­sion plan­ning should be a pri­or­ity for small-busi­ness own­ers, since a com­pany’s sur­vival can de­pend on it. That can in­clude choos­ing some­one to take over a busi­ness when the owner re­tires, and it can help pre­pare a com­pany to be sold.

But it’s of­ten on the back burner. Sixty per­cent of own­ers in a sur­vey re­leased by in­surer Na­tion­wide said they didn’t have a suc­ces­sion plan, and of those own­ers, nearly half said they didn’t think it was nec­es­sary. The sur­vey, which ques­tioned 502 own­ers and was re­leased in Fe­bru­ary, found that own­ers in their 20s and 30s were more likely to have a suc­ces­sion plan than those who were baby boomers or in their 40s.

Such plan­ning can take time that own­ers may feel can be bet­ter used, and it means deal­ing with the pos­si­bil­ity of be­ing in­ca­pac­i­tated or dy­ing.

“It’s tough from a men­tal and emo­tional stand­point be­cause you’re faced with re­al­i­ties you don’t want to think about,” said Court­ney El­lett, who owns Ob­sid­ian Pub­lic Re­la­tions in Mem­phis. She has been work­ing on plans for what she calls “the long-term life of my com­pany.”

Own­ers need to cre­ate “the proper struc­ture so if you’re in the hos­pi­tal re­cov­er­ing from a heart at­tack, that you have the abil­ity to have other peo­ple step in, man­age things, pay bills,” said Jen­nifer My­ers, a cer­ti­fied fi­nan­cial plan­ner with SageVest Wealth Man­age­ment in McLean, Va.

“What took you years to build up can un­ravel in less than a month,” she said.

Plan­ning should in­clude spelling out in writ­ing what the owner does and who should take over those tasks. A trusted em­ployee, rel­a­tive or friend should be able to sign checks and pur­chase or­ders, and have ac­cess to ac­counts and records. Own­ers should buy in­sur­ance that pro­vides money to hire some­one to run the busi­ness if they’re in­ca­pac­i­tated for an ex­tended pe­riod, My­ers said.

If there’s no one at the helm, ven­dors and cus­tomers might get ner­vous, said Tony Ar­giz, a cer­ti­fied pub­lic ac­coun­tant and CEO of the firm MBAF in Mi­ami.

“Bankers can get scared

and start call­ing in credit,” Ar­giz said.

Part­ner­ship agree­ments have their own con­tin­gen­cies that should be ad­dressed. For ex­am­ple, if one part­ner dies, does the other have the first right to buy that per­son’s share? Many part­ners take out life in­sur­ance poli­cies on each other to en­sure they’ll have enough money to buy out any heirs.

El­lett, who is 42, be­gan con­sid­er­ing the “what ifs” a few years ago, when she was think­ing about a will and how to pro­vide for her four chil­dren.

“The busi­ness is my big­gest as­set. How does that con­tinue to be an as­set if some­thing hap­pens to me?” she said.

Sayles’ plan is sim­i­lar to that taken by her firm’s se­nior part­ner, Dianna Russo. Af­ter co-found­ing the ac­count­ing firm and lead­ing it for more than 20 years, Russo turned over its man­age­ment to Sayles on Jan. 1 and plans to sell her stake to Sayles and two other part­ners in 2018.

Sayles be­gan the tran­si­tion to manag­ing part­ner five years ago. She al­ready knows what she’s look­ing for in a po­ten­tial suc­ces­sor — some­one who’s am­bi­tious and will­ing to take on the risk of own­ing a busi­ness. But while she has plenty of time, there are no guar­an­tees she’ll find the right suc­ces­sor.

“I worry no one will be there to buy me out, and we’ll have to merge with an­other firm or dis­solve,” Sayles said.

The dream of many own­ers that their sons and daugh­ters will take over the busi­ness is of­ten dashed. Al­bert Steed wants his chil­dren to learn the skills needed to run his tech­nol­ogy

con­sul­tancy, Ad­vanced Com­puter So­lu­tions, but isn’t count­ing on their suc­ceed­ing him.

“I see this a lot — other busi­ness own­ers’ kids don’t want any­thing to do with the busi­ness or aren’t cut out for it,” Steed said. He’s set­ting up the Tra­verse City, Mich., busi­ness so that if some­thing hap­pens to him, his wife can hire some­one to run it.

Pre­par­ing a busi­ness for sale is a lot like get­ting ready to put a house on the mar­ket: Would-be buy­ers might not like what they see when they start look­ing closely.

“There might be price on the ta­ble con­tin­gent on due dili­gence and then things start pop­ping up,” said Karen Reynolds Sharkey, a busi­ness strat­egy ex­ec­u­tive with fi­nan­cial ser­vices com­pany U.S. Trust. “Deals do get rene­go­ti­ated and prices can fall.”

Some is­sues might be that too much rev­enue might come from one prod­uct or a small num­ber of clients. Or there are en­vi­ron­men­tal re­stric­tions or vi­o­la­tions on the prop­erty.

Own­ers shouldn’t wait un­til they want to sell to get it into shape. “It’s best to adopt a prac­tice of per­pet­u­ally run­ning your busi­ness as if you’re ready to sell any day, mak­ing it as ef­fi­cient, pro­duc­tive and prof­itable as pos­si­ble,” My­ers said.

Har­ris Ka­plan learned that les­son when he de­cided to sell his mar­ket re­search and con­sult­ing com­pany in 1992 — it took about four years to get it in a po­si­tion where it would be at­trac­tive to a buyer. When he started his cur­rent com­pany, mar­ket re­search firm Healogix in Hor­sham, Pa., he cre­ated a board of di­rec­tors to ad­vise him and re­view his de­ci­sions.

“I said, ‘We’re go­ing to run it as a saleable busi­ness from the get-go,” Ka­plan said.


Jes­sica Sayles, a part­ner in an ac­count­ing firm in Las Ve­gas, be­gan the tran­si­tion to manag­ing part­ner five years ago.

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