Most people who own a business are focused on making it a great success. Few of us spend as much time thinking about winding down the business or transitioning it to someone else.
Usually there’s not enough time in the day to worry about every “what if.” But business succession planning isn’t a new idea. Business leaders have long wrestled with ways to not only retain talent, but also groom new leaders.
With the weight of the economy falling more and more on the shoulders of the small- to medium-sized business owner, what happens to the people behind these businesses is a pressing issue. If you painstakingly built your company from the ground up, don’t you want to know it will continue to grow even if you are not actively running it? Are you potentially shutting down a healthy business if you’re no longer at the helm? Will your business be crippled due to the inability to pay inheritance taxes?
Proper planning can take the guesswork away. If your intent is to start your business in order to sell it down the road, then you will need an aggressive growth plan and exit strategy in place. However, if you plan to have a “business for life,” then you can grow slowly and with a smaller budget, but you still need to have a succession plan for your business.
One person who knows what it means to have a business for life is Bill Pedersen of Pedersens Rentals. His father started the company in 1949. Bill joined the family business in 1969. Today, Pedersens Rentals has grown to be the largest party rental business in the Pacific Northwest, but Bill is now at a stage where he’s gradually passing on the day-to-day responsibilities of the company to his two daughters – both of whom also own part of the business.
Bill is proud that his daughters are part of a new and diverse group of entrepreneurs who contribute to a strong, local economy. Rhonda Pedersen, Director of Sales at Pedersen’s Rentals always planned to run her own business and was able to implement new and creative ideas to grow the business. She plans to continue using her creativity to keep the event planning business fresh and interesting.
Bill’s best advice to other business owners is to plan ahead, don’t procrastinate and ensure you have strong leaders in your organization who you believe can run the business well without your guidance. Make sure you know what costs are involved to transfer ownership of your business and ensure you get the best advice from your banker, lawyer and accountant. Seek professional advice for estate and retirement planning and make sure you put aside sufficient funds from your business for your retirement before you transition ownership.
Many financial institutions offer financial planning services that take into account different aspects of a succession plan such as business tax issues, insurance coverage, estate planning, and investment and pension planning. Relying on this expertise means the business owner can focus on what he or she does best.
“It usually takes several hours to pull together the required documents that give insight in to your business structure and another few hours to review the information with a certified financial planner,” says Cindy Taylor, Vice President for the Sustainable Wealth Management team at Vancity. “The financial planner can provide detailed advice on how to best protect your company for the future. It is well worth taking the time for succession planning”.
Bill Pedersen’s vision for the future is that his daughters maintain their leadership position in the party rental business and continue doing a great job adapting to the ever changing demands of the market. Bill rests easy knowing the company he worked so hard to build will continue to thrive for another 60 years because he has worked closely with his daughters to lay a good foundation for the future.