Seeking Succession by Loyd H. Rawls About the author: Loyd Rawls is President of The Rawls Company in Orlando, Florida, and has specialized in family estate and succession planning for closely-held, family owned businesses since 1973.

Part One:
Getting Started

The succession process is more than passing total ownership of a business from one generation to the next. The transfer of the business is actually the easiest step in a succession plan. If you have the money and time, you can buy the talent, documents and insurance policies that will get the job done. What you cannot buy is success beyond the transfer. After receiving the baton in the relay of business succession, the next generation must run its own race and win, lose or fall based upon the quality of its' training and dedication to the business relay event. Specifically, the succession process consists of several very important facets that will be individually addressed in a series of articles throughout the year.

Getting started is no easy task. Planning the succession of a business has got to be the easiest business task to postpone or deny. For parents to initiate discussions about turning a business that took a lifetime to develop, over to their children, is typically not a charming or welcome subject. Additionally, for a business owner to talk about his or her death, and how wealthy their children will become as a result, is not a fun subject either. Getting the succession process started must be a high priority item if a business is going to successfully transfer to the next generation. In twenty-seven years of succession planning, I have witnessed far more creativity from parents finding excuses to postpone their planning than I have seen used in the actual transfer of their business.

Succession or disposition planning is a long-range activity influenced by many factors such as taxes, family, feelings and health. To be successful at this extended activity, a plan of action is useful to help keep the planning effort on track for the ultimate achievement of your goals. An action plan also provides focus and structure to deal with the common emotional challenges of succession. As an example, the typical succession planning environment involves several customary elements of a family that can become volatile when mixed. These well-chronicled volatile combinations include business control, money, taxes, and in-laws. If your planning is going to survive the excitement generated by these controversial subjects, you should have a "no brainer" action plan to put you back on track after you have had one of those special emotional experiences that are common place in the family environment.

Although you can approach succession planning from several different directions, experience has shown that an effective succession process typically has these common action steps.

1. State your objectives
2. Review alternate action steps
3. Confirm objectives
4. Develop a succession action plan
5. Follow through with action plan

The first step in the succession process should be the organization of your ideas into written objectives establishing the foundation for your plan. This activity can be quite simple or challenging depending upon the degree of forethought you have expended on the subject of succession. The intellectual process of converting ideas into written objectives will be very helpful in refining your goals. Be sure and address the objective of your personal security first. The conclusions you make regarding personal financial security will directly impact other subordinate goals such as when to retire and when to transfer the business to your children.

There are a variety of succession planning avenues through which you can achieve your business succession objectives. Succession planning is a very flexible and versatile area. The wide diversity of alternate estate structures, stock transfer methods and business structures can and often does, create confusion. Each alternative has a different impact on the various members of a family and business. However, rest assured there is a plan that will satisfy the unique circumstances of your finances, family and business environment. If you will just hang in there with your succession planner, attorney and accountant, and expend the necessary time and energy to consider the various disposition alternatives, you will be able to determine the most appropriate course of action and obtain peace of mind regarding the successful succession of your business.

Next Issue, Part Two:
Creating a Plan

"Seeking Succession, Part One: Getting Started", © 1999, Loyd H. Rawls. Publication, reproduction or use of this article other than that of this publication is strictly prohibited without the express permission of the author.