Why business sales fail – Succession planning

The succession plan is not about you. 

When business owners hear questions about a succession plan they usually respond with: “my kids aren’t interested.”
It’s what they hear: “have you thought about a successor for you?” The question is heard as one of what their dreams may have been about. But that really isn’t what buyers want to know.
Succession planning is the planning for each and every critical job description – who is next in line for that job?

Failed succession planning is fatal

In the day to day running of a business it should give comfort to management that if someone gets sick or dies, or simply leaves, someone else can do their job. All round it is less stressful. For shareholders, it is the sort of thing they expect from management.

• The registered engineer required by law to sign off on each project
• The griller who has the secret mind-source your patrons expect
• The quality manager who has an eye for detail
• The tool-setter who gets the production line set each day
• The forklift driver who works with speedy caution
• The project manager who has a knack for getting things done on time
• The software architect who has a vision for the future
• The networked salesman who brings in more business than anyone else

When shareholders and directors are the same people, as in most small and medium-size businesses, these niceties are often over-looked. The shareholder isn’t going to fire himself. And of course, we all know that the small business owner will just work two or three jobs to make sure stuff happens.
The more complex and niche your business, the more likely there is someone, within or outside the c-suite, who is critical to the success. Perhaps the business can do without them for a few days while others take up the slack, but not for long.

Succession planning cannot be cause for failure

Now think about a new owner, already on a steep learning curve, having to deal with a skill crisis. They cannot afford to fail with a new acquisition. So they will cut it short at the negotiating table.

Many a deal has collapsed during the due diligence because amongst the other little niggly things that may be excused, this one becomes evident. If there is reason for a sale to fail, this might be the straw that breaks it.