Many fire and security business owners plan or hope to hand down their businesses to their children or other relatives. Though this sounds like a great idea, there can be many unexpected concerns and questions as your exit approaches.
Following the steps for succession planning can make a big difference in addressing these concerns and questions early. It can also help you learn whether or not your children want the business, then start to make alternative plans if needed.
Is Succession Planning Important for Your Business? Here Are a Few Key Questions to Answer First
Succession planning is the process of preparing people within your business to take over the management of it once you step down or retire. It is a key component of your exit strategy that starts well before your planned exit and happens in front of the team. This helps them know who is taking over and start to feel comfortable with the transition before it happens.
It also gives your team the chance to watch you, the owner and possibly even founder of the business, have a direct role in guiding it into its next stage. This can be a great comfort for both employees and customers. It can also make it easier for you to let go of your business emotionally when the time comes because you will know you left your company in qualified, well-prepared hands!
Some questions you need to ask yourself as you consider the future of your business are:
- Do I have people in mind who I want to run the business after I exit?
- Have I asked those people if they are interested in running it?
- Are those people qualified and prepared to manage and operate it well?
- Will those people be buying the business from me? Can they?
- In terms of finances, how will I be taking care of my future through my exit?
- How do any partners or family members who are also invested in the business feel about this?
- When am I planning on stepping down from my role or exiting the industry?
Thinking about these questions will help you know if succession planning is right for you at this point in your career.
If Your Children Are Involved, It’s Important to Find Out What They Really Want
If your children are already involved in the business, chances are the team assumes they will continue to lead the company once you retire. Many fire and safety owners make the mistake of assuming this, too. But, your children may not want to continue running the business once you’re not a part of it. This can be a hard realization for family business owners.
In cases where your children do hope to keep the company going after you, there are still many details to discuss. A lack of careful planning can lead to hurt feelings and messy operations. This is why succession planning is important. It helps you walk through these details ahead of time.
Succession planning can also be helpful if you plan to transition your family business to someone who isn’t a family member. It can give the family members who are financially and/or emotionally invested in the company the chance to feel comfortable with who will be carrying on your legacy and hear how their investments will be returned.
How Family Business Advisors Can Help – and Hurt – The Decision Process
Family business advisors are professionals who specialize in helping families through the steps for succession planning. With their experience and training, they can help fire and safety business owners discuss difficult topics with family members and work out important details of a transition plan. These include tricky financial conversations that those hoping to take over the business may have underestimated.
If you hope to sell to another family member or hand your business down in some way, meeting with family business advisors early is a smart idea. You may find that, as much as you and your family love the idea of handing down the business, you cannot afford to do it the way you expected. These advisors can help you understand what’s possible and what isn’t, then explain the options in front of you. They can also help you learn about new options you hadn’t considered.
It is important to understand that this process is a stressful and intense one. If you decide to involve family business advisors, it is critical that they do not take sides and remain a neutral party. You may need to be direct with them about what conversations are okay and which ones should not be held in front of the entire family. This way, everyone is comfortable and no one’s feelings are hurt during this difficult process.
Setting expectations and boundaries between yourselves as a family before these meetings can also be helpful. You don’t want anyone to feel blindsided by information or plans that are shared for the first time across a boardroom table.
Steps for Succession Planning, Depending on Your Hopes for the Future
If after asking yourself some important questions about your business and its future you still decide succession planning is right for you, the process will follow a few basic steps.
Identify Key Positions
First, you will need to decide which positions within your business are the most important for its success from a leadership perspective. These are the positions you will need to have people in mind to fill. Then, you need to consider the people you had in mind and decide if they have the skills and experience to fill those roles. If not, can they be trained? If they don’t have the skills and cannot develop them, these are the roles you will need to find alternatives for when it’s time to exit.
Outline this process as you go. Fill in the people you have in mind and make notes about what development needs to happen internally. Decide on your ideal exit timeline, then backtrack to figure out when your up-and-coming leaders need to be prepared to transition successfully.
Confer With Experienced Counsel
At this point, it’s a good idea to seek out experienced counsel to make sure your plans are realistic and doable. You may want to do this before you talk with those you have in mind, then again after you have brought them into the conversation.
Talk with your accountant, your business partners, your personal financial advisor or manager if applicable, and anyone else who will be part of handling the practical and financial side of this transition. Once you have reached an agreement together about who will be taking over and how the process will work, it needs to begin and be evaluated as it progresses.
If you realize that you have the right people to fill every role but no one has the right capital, it doesn’t mean you have to change all your plans. It may mean that selling part or all of the ownership of your business to the right partner is the better way to take care of yourself financially while keeping your kids involved. To navigate this correctly, you will want to work with a broker who understands both your industry and the complexities of a family business.
Need Help Finding the Right Buyer for Your Family Business? Call AFS!
Rory Russell, the managing founder of Acquisition and Funding Services (AFS), has been helping business owners transition out of their businesses and pass them to the right buyers for over 30 years. He specializes in brokering the sale of fire and security businesses and can help owners find partners who are prepared to respect their succession plans. Whatever is most important to you during the sale of your business, he can find the right deal to meet it!
Over the decades, Rory has seen it all and will help you navigate through your unique situation. Contact him today to learn how AFS can help you and your family with your ideal exit strategy.
Looking for more insight related to succession planning in the alarm security industry?
We have you covered! Be sure to check out the following resources for more helpful information related to exit strategies and succession planning:
Alarm Business Succession Planning – Our top tip for planning for your (and your business’) future is to engage in succession planning ahead of transitioning out of your role. Learn more about the key to successful alarm business succession planning and the benefits of working with a qualified advisor as you navigate the process.
Creating an Exit Strategy – Review the key steps involved in developing an exit strategy as you prepare to leave your alarm, fire, or security business.
How To Sell Your Company AND Take Care of Your Employees – An especially helpful read if your succession plan involves selling to an outside buyer or merging with an existing organization. Learn about how to do what’s right for you while making sure your employees are taken care of as well.
Exit Strategies That Respect Your Legacy – Learn about strategies and options for selling your fire safety company and exiting the industry while keeping your business’ success and your legacy intact.