Switching successors for business owners can be necessary

This decision is especially difficult for those running family-owned businesses, who may have multiple children or other relatives to take into account. Over time, the selected individual may turn out to be unqualified, ineffective or unwilling to take a leadership role.

Ask around
Before you dismiss your chosen successor, discuss the situation with several objective parties. These might include professional advisors, such as your CPA and attorney, as well as trusted family members, friends or colleagues with business experience.

Your goal is to determine whether your perception is off the mark. You may think, for instance, that your successor lacks the necessary skills to run your company. But the person might simply have a different leadership style than you do. Talking with others may help you put things in perspective.

Look for ways to help
If you come to believe that, with some work, your successor may still be capable of running the business after all, meet with the person. State your concerns and outline what must change.

And do not forget to listen. Ask why your successor is having the difficulties you have pointed out. Perhaps it is a lack of formal training in one aspect of the job. In such cases, there may be a class that can help provide the needed education, or maybe more mentoring from you might solve the problem.

It is also possible your successor is facing personal issues that are getting in the way of work. For example, the person may be having financial problems, battling an addiction, or struggling in a marriage or other personal relationship. By listening, you can find out what the specific issues are and how you may be able to help.

Avoid past mistakes
After talking with others, and perhaps your successor, you may still feel the person needs to be replaced. If you decide to move on to someone else, tell your successor as soon as possible and explain why. Being honest and forthright, though difficult, will help settle the matter efficiently. As part of the conversation, ask whether there is anything you could have done differently to avoid the impasse that developed.

Following that discussion, reconstruct the succession planning process to determine what led you to choose your initial successor. Review personal notes, memos and emails. Speak again with your professional advisors as well as trusted employees, family members, friends and colleagues about picking someone new. Ultimately, you want to develop objective criteria for your new successor and eliminate the impediments that kept your initial choice from working out.

Finally, if your second choice also does not work out, stay open to the possibility that the problem may not lie with your prospective successors. It’s possible that the demands you are placing on a successor may be somewhat unreasonable, or that you are inadequately communicating your wishes and expectations.

Prepare for contingencies
Many business owners select successors, invest diligently in mentoring them, and transition into retirement with confidence that their companies are secure. However, as you are likely aware, rarely do things go perfectly in the business realm. Therefore, preparing for contingencies is crucial in succession planning. To support this, consult your Rudler, PSC advisor to assist you in incorporating smart tax and financial strategies into your plan. Contact us at 859-331-1717.

Switching successors for business owners can be necessary

Selecting a successor often presents the greatest challenge in succession planning for many business owners. Even more challenging is the fact that many business owners’ initial selections for a successor often fall short.

RUDLER, PSC CPAs and Business Advisors