Use Your Succession Plan to Keep Your Promises

Use Your Succession Plan to Keep Your Promises
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I’ve written in this blog about communication during business transitions. Productive dialogue between owners and successors, owners and spouses and owners and key stakeholders isn’t easy but it’s a requirement for successful transitions. In this post, I will describe how you can use your succession plan to keep your promises.

Effective Communication

From long experience, I’ve developed four guidelines for owners who want to communicate effectively during and throughout the succession planning process.

  1. Prepare for conversations. Know what information you want to gain from the conversation and what information you will and will not share. Try to anticipate how the other person may think or feel and consider how you might best respond.
  2. Be honest and appropriately transparent.
  3. Do not try to persuade anyone to do something they don’t want to do.
  4. Make no promises.

How Can You Keep Promises You Haven’t Made?

When I advise owners to make no promises, I’m asking them to hold off until they know or have at least thought about what we call The Big Six™:

  • Why they want to transition their companies,
  • What they have to transition,
  • Who they want to succeed them,
  • When they want their transition to begin and end,
  • How much they want or need to finance the next phase of their lives 
  • How they want the transition to occur (e.g., sale to a partner, key employee, gift to a child, etc.) 

Until you choose a destination and create a map of the path to take you there, making promises that you may not be able to keep can damage your relationships with the important people in your life. Consider Peter (not his real name) as Exhibit A.

Use Your Succession Plan to Keep Your Promises

Peter’s two mid-40-something sons had worked in his company for years. When they were children, Peter had told him that one day he’d turn the company over to them, so they looked forward to being owners.

The first people Peter consulted about structuring a transition were his CPA and attorney. When he told them that he wanted to pay the minimum amount of taxes possible, they recommended that he use his estate plan to pass the business to his sons. They’d receive a step-up basis, and everyone would save on taxes.

The third person Peter consulted was his wife, Sue. When he told her that he’d solved the transition puzzle that evening, he was met with stony silence before Sue headed outside. Confused, Peter followed her and asked what was bothering her. With that, the gates opened. “You promised our boys for years that they would own the company. You are 72 years old and have not made one move in that direction until today when you tell me that ‘one day” is the day your die? How long do you expect them to wait? How long do I have to wait to take some of the trips we’ve put off for years?”

Peter was stunned. Before he could explain that he was going to give the business to their sons, Sue continued, “You are breaking your promises to me and to our boys. When you tell them about your plan, I hope you are not surprised when one or both decides to work somewhere else.”

Sue left Peter in the dusk to consider his next move. He realized that he’d been so dazzled by the prospect of minimal taxes that he’d overlooked two important points. First, if his sons didn’t own the company until his death, they’d lose most of their prime wealth-building years. And also first, he’d break his promise to his wife.

It was at this point that Peter called us. We worked with him to set his goals—which included transferring ownership to his sons and traveling with his wife—and answer The Big Six™. Using that information, Peter was able to create his Transition Roadmap™—a succession plan that enabled him to keep his promises.

Today, Peter and Sue are checking off designations on their bucket list and their sons are running the company. Peter readily admits how lucky he is to have two great sons who were ready and willing to take over the business and that they had realized their dreams: his of passing the business his sons, his sons’ of owning the company, and his wife’s of seeing the world. He also recognizes that a lower tax bill would have cost him the priceless relationships with the most important people in his life.

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