4 Steps for a Successful Succession PlanningMay 16, 2023
(Part 2 of the Multi-Unit Franchising Conference 2023)
Continuing with the 2023 Multi-Unit Franchising Conference series, in this blog post I’ll share the key points and takeaways of a session about succession planning.
But first, let me tell you a little bit about this important franchising event. It is focused on the knowledge and development of multi-unit franchisees, giving them information, knowledge, and tools to achieve their dream of true time and financial freedom through a multi-unit franchising business.
I think that business owners should think about their succession plans from day one. Yet, the panel of this session pointed out how, for many of them, that was one of the last things on their mind at the beginning.
They were focused more on survival rather than strategic planning for the future. But as soon as they stabilized the business and start making profits, then they realized how important this is and started planning.
Each panelist brought a unique perspective on succession planning:
- The heir, Paul Booth, from Concentric Brands. He’s part of the second generation of a McDonald’s franchise and eventually got into the Ace Hardware franchise to have a business of his own.
- The brothers, Charles and Jessee Keyser, from Keyser Enterprises, a company that operates franchises like Sports Clips and Oxifresh Carpet Cleaning, and previously, Little Caesars Pizza.
- The father-son duo, Brent Veach and Craig Veach, from Veach Enterprises and Del Taco franchise. Brent owns 55 Del Taco units, and he is going through the process of succession planning for his children, Craig being one of them.
- The facilitator, Kendal Rawls, from The Rawls Group, an organization that just turned 50 years doing succession planning for medium to large organizations. He was the facilitator
These franchisees shared four steps to have a solid succession plan. Take note of their recommendations to ensure things will be in place and in the right direction once you begin your next chapter.
Step #1: Start with your vision
A great place to begin this process is to analyze why you became a franchisee and what vision, purpose, or goal you want to achieve through your journey of being a successful entrepreneur.
Kendall advised that before you start working on your succession plan, you have to discover what’s your vision because this will determine the steps that you take after that and the structure of what you want to build.
We can all agree that the thing that all business owners have in common is the desire to achieve time and financial freedom. But beyond that, other drivers make you take decisions along the way.
For one of the panelists, one of the biggest reasons was his unwillingness to trade time for money. He saw this as a common thing in the corporate world where people who have a job are just trading their time for a salary.
He wanted to go beyond that and saw the entrepreneurship world as a way to obtain the results he wanted. If you focus on the right actions and the right efforts, he says, you will have a lot more than what you would get out of just exchanging time for money.
Another panelist’s motivation was building a financial future to help support the family. He mentioned how 96% of the wealth created disappears after three generations, which is shocking! So his particular goal was to prevent this from happening in their organization and to have a lasting legacy.
Another perspective was to build an organization they could eventually sell and have the freedom to do whatever they wanted with the rest of their life.
A more personal motivation came from Brent Veach. He was a pretty successful accountant but at some point, he wanted to spend more time with his family. And he knew that, through entrepreneurship, he could have the freedom to be present for his children.
Step #2: Find an objective mediator
Once you have a vision, you want to make sure you find some sort of objective mediator so you can complete this plan and have a successful and positive experience for everyone.
Having an objective mediator is important because of several reasons:
- To avoid or at least reduce family conflict because, when it comes to businesses and money, ugly things may happen.
- This figure will allow the relatives to have healthy, positive conversations about possible future scenarios and foment unity, joy, and happiness among the members of the family.
- Mediators are very knowledgeable. The tax laws and other legal things may change practically every year, so having an expert help you navigate those changes is a very wise decision.
- An objective third-party mediator can analyze the different personalities, abilities, strengths, and weaknesses of each family member and determine who’s the right person to do certain roles. Think about it! You wouldn’t want your children to do something they're not going to enjoy.
- A mediator will help you face the reality of your family dynamics and make it a positive experience for your family so that, when you pass on the business or leave, things get resolved in the most favorable way for everyone.
This mediator could be an organization like The Rawls Group, to guide you on how to build up the succession plan, do all the legal, procedural, and documentation processes, and help you maintain it year after year so that it is updated based on your needs. Or you can hire someone to coach you so you can fulfill the plan on your own.
Step #3: Create your will & trust
Find someone that has the knowledge, abilities, and skills to do the succession legal process the right way.
A key legal action you have to focus on is creating your will and your trust. The first one is a way to clearly define what you want to happen to your business the day that you are no longer there. On the other hand, the trust is the document that will help you protect your estate from excessive taxation.
Having experts in those areas will help you make the best financial decisions for your business so that you can protect everything you have built and maximize the return on the investment you've done, not only in terms of money but in the time it took you to grow your business.
Beware: trying to go cheap on this matter could end up costing you more money in the long run!
Step #4: Retain top talent
Nobody's going to run the business or know the operations the way you do. You can protect that by building a team of leaders who can continue your legacy regardless of who's leading the organization. That’s why retaining top talent is a critical element in succession planning.
The panel shared some other strategies around talent. For example, how if these leaders understand the culture, the structure, and what it takes to make the business a healthy one, the transition will be easy once it happens.
One of them also mentioned that they do monthly roundtables with the leaders not only to communicate and pass information but also to help develop them and build a relationship of trust and commitment around the organization.
Another one shared how having a solid commitment to promoting from within and offering opportunities and a career path for everybody in the organization will help you build and grow the future leaders of your organization. Another idea they gave was creating incentive plans for the leaders so that they can benefit from the wins of the organization.
Other best practices for succession planning
The panel shared these extra tips that I’m sure will help you strengthen your succession strategy:
- Start succession planning NOW! As soon as you get out of that survival mode, start thinking about succession planning.
- Work outside of the family business before joining. This gives the young relatives exposure to other people, other cultures, and other ways of doing things. And, what’s more important, they bring that value into the family business. They also get the opportunity to decide if entering the company is truly what they want to do and not something that’s expected of them.
- Create generational success. One of the ways to do it is by purchasing the land for long-term benefit, either by building units or as rentals.
- Share financial statements with the leaders of the organization. This way, they’ll be able to understand and own the business they're running.
- Be transparent with your children. When they are old enough, share with them the good times as well as the bad times. This will allow them to understand the seriousness the company requires. Otherwise, they might have a misconception of what the business is, which could ultimately lead to generational failure.
- Expose the next generation to all the parts of the business. Involve them in different meetings so that they can get a holistic picture of the business, and the knowledge and skills they require to run the company in the future.
Hopefully, this information will help you start planning your succession plan so you can protect the legacy of the business you have worked so hard to build.
Don’t forget to follow us on our YouTube channel, subscribe to our podcast and find us on all of our platforms across social media, where you can find a lot more knowledge, tips, and information for you to be successful.
- Can you remember why you wanted to become a franchisee? What drove you to this entrepreneurial road?
- What rules would you set for relatives who want to get into the family business?
- Are you protecting your business and your family as much as you could?
- How can you make the succession process positive for your family?
WATCH THIS VBLOG on YouTube HERE.