• Diversified Transportation Management Consultants
  • Successor Planning

    Is your company prepared for long-term growth?

    Beginnings are tough! For many owners of a business, succession – and the planning it entails – is the equivalent of planning their own funeral. The fact is that the transfer of power from one generation to the next or the selling of a business seldom happens while the founder is alive and still on the scene.

    Regardless of which generation is involved, if you have made the decision to sell your transportation business, the succession transition is one of the most agonizing processes that an owner or a Chief Executive Officer of a trucking company has to deal with. When you hear the term “successor planning”, you automatically assume that it’s going to be the shift of responsibility from one generation to the next, or the shift of generation from one family to the employees. That’s not the only way to establish a successor plan.

    A successor plan involves a process of:

    • How you plan to exit the business
    • Making a determination whether the business will be sold to family members, if you are going to create an Employee Stock Option; or
    • You decide you are going to sell to an outside party.

    More than 80% of all business enterprises in the United States are family owned. Nearly 35% of Fortune 500 companies are family owned. In the trucking industry, 60% or more of trucking companies consist of 1 – 99 trucks.

    Whether you expect leadership to change in the near future or not, it’s never too early to begin preparing for the crucial step of the company’s longevity. In Ahern’s consulting process, we are asked many times, “When should I start planning to exit the business?” The response, “The day that you start a business.” The day that you start a business is the day that you should start planning your exit strategy – unfortunately, most people do not.

    If you are a family-owned business and you want to pass the business on to your children, you must recognize that you must look at your children as they actually are, not as you perceive them to be. In order for a family-owned business to survive, the family must accept the fact that “like it or not”, everyone in the family, whether a shareholder or not, manager or non-manager, is ultimately tied to the future of the business. These individuals are the major source of weakness of a family business. In many situations, their commitment, competence, and understanding of the business are not inherited, but learned.

    If you own a business and it’s a family business, you need to have a clear understanding of the following questions in order to establish a successful exit strategy. These can be identified in 9 areas as key steps to guide discussions to begin structuring a smooth transition plan.

    • Who are the motivated successors?
    • Do they possess the knowledge and experience beyond that of the owner?
    • Is there an organizing harmonious team of key managers?
    • Do they approach their responsibilities professionally?
    • Do they agree to accept new leadership enthusiastically?
    • Does the company have competent advisors who understand the dynamics of the business and understand the successors?
    • Are these advisors willing to move the business through the challenges that the business will face in the future?
    • Is there an easy and rational ownership structure? One that’s not confusing and one that does not simply state: if you are born in the business, you are entitled to the business.
    • Are the successors accommodating to the needs of each other in the business? Can they cooperate and work together; can they agree to separate themselves from the business?
    • Last, but most important, who will take over the responsibilities of the President?

    Many times, Ahern is involved with an owner who has multiple children in the business, and he or she is afraid that there will be conflict if the parents choose one child over the other. I explain to each client that’s going through this process that they need to do some “selective pruning”. Therefore, you need to set measures for consideration, and you need to measure your children based upon those considerations.

    • What are the successor candidate’s personal goals?
    • Does he/she know who they are?
    • Will they stand in the way of or encourage family business leadership?
    • Has the successor learned about the business?
    • Is he/she a “quick study”?
    • Has the successor practiced good money management in life and work?
    • Do they have outside experiences that prepares them for the challenges of a family business?
    • Can they learn from their mistakes?

    Also, as part of the process of reviewing your children, it is vitally important that you observe the way they handle themselves under pressure.

    • You must watch and observe how each child approaches tough decisions;
    • How he/she solves problems;
    • How they meet responsibilities; and
    • How they handle ethical challenges.

    Additionally, it is also important that you have a competent Board of Directors that can assist your company through this process. Ahern has assisted many family businesses in transferring control from one generation to the next, but it is a process that takes time, thought, and patience. If you are considering a transfer of ownership or have not prepared for the inevitable, give us a call at (602) 242-1030.

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