You Are Not Alone
Two thirds of businesses in the U.S. are family or privately owned. This translates to between 70% to 90% of the U.S. annual Gross Domestic Product (GDP). Some 40% of family owned businesses will be facing the “what’s next” question over the next 5 years if not right now:
- Pass on to the next generation?
- Seek a private equity partner?
- Sell to management or to an outside buyer?
- Execute an ESOP?
Yet surveys suggest that some 70% of you have yet to put a business succession plan in place.
88% of you believe that the same family or families will control their business in 5 years. Yet statistics from the U.S. Small Business Administration show that only 30% will successfully make the handoff from one generation to the next. With the third generation, it drops to 10%.
- One reason might be that 64% of family owned businesses do not require family members entering the business to have the qualifications or experience necessary for success.
- Further, expertise, decision making and even key customer relations often rests with the founder(s).
The Critical Questions Then
- What is best for the future survivability of the business?
- What actions to take to assure maximum valuation of the business regardless of the future direction chosen?
The Answer…Succession/Exit Planning
Public companies require that a succession plan be in place for the most critical of employees in order to assure leadership continuity. Before investing, Venture and Private Equity firms require an exit plan. For privately held or family owned business it is of equal if not greater importance to develop such plans. And putting a plan into place early is not just important personally. It is also a crucial decision for the long term health of the business and the welfare of family members, employees and customers alike.
Yes, it’s personal for sure…and very emotional. Facing what has to be faced raises all kinds of issues from identity to mortality. But facing it is inevitable, one way or the other. That is why a well thought out succession plan, devised early enough, can:
- Guarantee the continuity of the business
- Protect Family, Employees, Customers
- Assure one’s legacy
- Allow the owner to exit in a way that assures stability and the continuing generation of wealth and life style into retirement.
How Cornell Global Can Help
Cornell Global partners with a network of investment bankers, strategy advisors, CPA’s, lawyers and wealth managers in order to develop a viable succession/exit plan. Our part in devising the plan includes the following:
- Founder Readiness…we provide coaching and counsel concerning the various Succession/Exit options…ESOP, Management Buyout, Gifting Program/Family Transfer, P.E. Recapitalization, Sale of the business.
- Career Transition Coaching: Founder, next gen, others
- Family Mediation
- Next Gen Readiness Assessment and Coaching
- Family Council formation/guidance/coaching
- Leadership Team Assessment
- Leadership Development/Coaching
- Talent Acquisition…Non-family board members, non-family CEO, etc.
- Business Alignment/Stratification Assessment (D.I.A.LO.G., McGladrey Rapid Assessment)
- Employee Engagement Assessment (Gallup, Metrus)
- Employee Skills Assessment
- Tools to increase organizational capability defined as the ability to manage people for competitive advantage.
- Team Building