The Edge - Q2 2011 - (Page 25)
YOUR BUSINESS | by Stephen Reed
for Your Pool and Spa Business
MORE THAN 90
percent of businesses in the U.S. are family owned, but less than 30 percent make it to the second generation and fewer than 12 percent make it to the third. The key reason cited is a poor or, worse yet, no business succession plan. In fact, recent surveys indicate that only 30 percent of business owners have a succession plan. Whether your pool or spa company has been in the family for years or you built it from the ground up, it is critical that you develop a succession plan. Most business owners fail to understand that just as there is a human life cycle, there is also a business life cycle. It begins with the conceptual or idea stage, which progresses to the start-up period, followed by the growth phase, then the well-established maturing years and, finally, the exit or retirement phase. The most common mistake most business owners make is that they don’t plan far enough in advance for the exit phase. Most experts agree that succession planning should begin anywhere from 10 to 15 years before retirement. Even if you are one of those people who feel that you never will retire, a succession plan is still important in case something unforeseen happens to you, such as a serious illness, disability or even death. For the majority of family owned businesses, the largest asset the owners have is their business. They take precautions to protect most of their other assets, such as purchasing homeowners insurance to protect their home, auto insurance to protect their car, special riders to their policies to protect other specific assets such as jewelry. Yet 70 percent of business owners don’t do anything to protect the survival and continuity of their business. Here are the five key steps in developing a succession plan for your pool or spa business.
IDENTIFY WHAT’S IMPORTANT TO YOU
This means deciding, at least generally, how you wish to spend the rest of your life as well as what you want to happen to your business. Consider holding a family meeting to engage in an open and honest discussion regarding your goals and objectives. Failure to do so may lead to unfortunate and contentious situations that could not only tear apart your closely-held business, but your family as well.
DECIDE WHO IS MOST CAPABLE OF RUNNING YOUR COMPANY
If you have more than one potential successor, consider giving each candidate responsibility for the part of the business for which he or she is best suited. Look beyond your heirs for the most competent successor. Sometimes key employees may be a viable option through what’s known as an Employee Stock Ownership Plan (ESOP). If you cannot think of anyone qualified to assume control, you may be better off selling to a third party.
DEVELOP A MENTORING PROGRAM
Your goal is to ensure that your business will continue to run successfully without you. That’s why it is important to spend time grooming your successor to be sure that he or she has thorough training and quality leadership experience. You should even consider seeking this person’s input in the development of the plan. While mentoring your successors, you should also transition your relationship with your customers and suppliers.
DOCUMENT YOUR SUCCESSION PLAN
With the help of your accountant and attorney, write down every detail of how you would like your company transitioned. Your strategy should include choosing the right amount of insurance, maximizing valuation discounts
THE EDGE 25
Table of Contents for the Digital Edition of The Edge - Q2 2011
The Edge - Q2 2011
The President’s Message
Letters to the Editor
Delivering Retail IMPACT
Are Your Suppliers Giving You the Tools You Need to Succeed?
Smart Tips to Boost Profi ts Today’s pool and spa professionals know how to survive a tough economic climate.
Succession Planning for Your Pool and Spa Business
Service Excellence Done Right Pools & Spas knows the secret.
Water Testing – Back to Basics
Promoting Your Business with Email
Index of Advertisers
The Edge - Q2 2011