Creating a comprehensive and actionable succession plan is rarely easy for business owners. It's certainly a challenge for most contractors, who may find it difficult to step away from the day-to-day hustle and bustle of building to envision life without a hardhat.
If all this sounds familiar, know that there are ways to go about succession planning in a slow, methodical manner that can make it relatively easier. In fact, it may strengthen the plan you eventually devise.
Among the best ways to begin building the framework of your succession plan is to determine "what you've got." You know you own a construction business, but how much is it worth and what are its primary value drivers?
To determine these things, you can engage a qualified valuation expert familiar with the construction industry. Even if retirement is years or decades away, a valuation can provide fascinating and useful insights about your company that may inspire key strategic moves.
In addition, clearly outline your projected date and goals for retirement. That is, do you intend to retire outright or gradually retire by, say, moving to a part-time schedule? Some business owners step down but keep a seat on the board of directors. You can pave your own road.
Be sure to consider all stakeholders when thinking about succession planning. Discuss the topic with, as appropriate and applicable, your spouse and family members — particularly those involved in the business — as well as fellow business owners and your leadership team. Give them an opportunity to provide input and listen carefully to what they say.
You'll also need to choose the best method to transfer ownership of the company, whether through a sale, stock gift, buy-sell agreement, trust or other option. It's also wise to address retirement and estate planning — how will your succession plan help fund your retirement and provide for your family and/or heirs?
Another important step is reviewing and revising your business plan to incorporate an eventual ownership succession. A business plan is essentially a baseline for monitoring progress and keeping the company on track. The targets laid out in the plan should serve as performance goals, and regular reviews of the plan can help determine whether the business is meeting those goals.
The plan should also define the responsibilities of each executive and manager. Your construction company's succession depends on the leadership team's ability to understand and carry out the financial and marketing objectives of the business plan.
This includes setting up a program to identify potential successors who are willing and able to take over — whether they be family members, employees or third parties — and to develop their abilities and transfer knowledge to them. Training can include industry certification courses, leadership workshops and business management classes, as well as day-to-day mentoring and job shadowing.
Perhaps the most straightforward way to make succession planning easier is to form a team of qualified, objective outside advisors to guide you through the process. Your advisory team should include a CPA, attorney and qualified valuation expert. Many contractors also meet with business consultants or brokers, insurance experts, and estate planning advisors.
These experts can help you fine-tune the many minute details of your succession plan. When the time comes for you to step down, they can guide you through the execution process to minimize the financial risks and tax consequences of, say, activating a buy-sell agreement you've established with other owners.
It's important to note that succession plans aren't only for future retirees. There may be other callings, business ventures or life circumstances that eventually motivate you to step down from the helm of your construction company. A solid succession plan, laid out well in advance, can help preserve the legacy of the business you've worked so hard to build. Our firm can help you get started or review and improve the succession plan you have in place.
Get in touch today and find out how we can help you meet your objectives.
