Succession planning is the task of deciding who will take over when you are ready to retire and how that transition will happen. It is certainly a hot button issue with many construction company owners; especially since many of the early construction company pioneers are now nearing retirement age.
Including your accountant or financial professional as a part of your succession planning is a good idea. This will allow you to see the full picture of what your future will look like after the transition of ownership has taken place.
Here are a few other ideas to think about when beginning a plan:
- Development – Think about succession planning as “succession development.” We see many companies put more effort and attention into the planning process than they do with the development process. Adjust your thinking so that planning is really the development process.
- Vision – What do you want your company to look like when the baton is passed? Does this vision match up with the company’s mission statement? Does it properly allow the business to adapt to a changing business climate?
- Custom Fit – Your plan should be specific to your company’s needs. There is no “one size fits all” plan. Think about retirement planning. Does the business have a plan in place for when its leaders retire?
- Employees – Take your employees into consideration. What will happen to the workforce once the succession occurs?
- Leadership Development – Do you know who the future leaders will be? Are the future leaders of the business being prepared for their prospective roles well in advance of the succession? Is there enough time to get them ready? Do you have roles defined?
- Tax Considerations – Considering that most construction contractors are transitioned to the next generation, rather than sold to a third party or liquidated, there are tax elements that must be considered. Some common transitional choices for the next generation in leadership include gifting, deferred compensation arrangements, sales and other arrangements where specific generations are skipped. All of these options should be examined.
- Assessment of the Plan – Are all of your bases covered? What else is needed to ensure this is the right plan for the company?