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What factors are driving succession planning today?

- John Mickelson, managing partner at Midwest Growth Partners, is IowaBiz's blogger on succession planning. Read more about him here. 

Demographic changes are driving succession planning. The Business Record recently hosted a breakfast titled “The Silver Tsunami.” Panelists discussed the large cohort of baby boomers who are currently in the workforce and seeking options for what to do after they leave the traditional workforce. Many of these baby boomers are business owners.

Why is a “Silver Tsunami” an important topic, and what does it have to do with succession planning? Let’s look at some facts:

  • 10,000 people each day turn 65, a figure that will continue for the next 19 years.
  • Estimates are that 65-75% of small businesses will be “for sale” in the next 10 years as owners look to retire, and the amount of value in the aggregate for these businesses is $1 trillion. And yet ...
  • Fewer than 30% of business owners have a succession plan.

Developing a succession plan can be an emotional experience. Business owners develop a connection with their business that is many times similar to that of a child. Like child-raising, there comes a point when you have to let go of total control.

Your job as a business owner is just like that of a parent – take steps to position your child/business to have the best chance to succeed once you are not involved on a day-to-day basis, which will eventually come.

There is no right answer for a succession plan, and it will be very individualized. Your succession plan should involve input from your family – whether they are in the business or not – and legal, accounting and estate planning advisers, just to name a few. There are also professionals who specialize in creating a plan.

The plan may change over time as circumstances change, which is fine, but the important thing is planning before you have to, when outside conditions may drastically limit your options. 

And finally for business owners contemplating their succession plan, it may be comforting to know that with such staggering demographic numbers, you are definitely not alone!

 

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