It Seemed Like a Good Idea

Oct 14th 2009, Legacy By Design

 

By Kevin Spafford for Implement & Tractor

At the time it sounded so promising, as many things do.

We recently remodeled our office. The endeavor interrupted our routines and wreaked havoc on our work flow. As we weathered the jumble of construction materials, dodged building crews and suffered sawdust drifts on everything, it was hard to remember that the intended benefits justified the short-term inconvenience. In hindsight, and according to the original plan, the effort was well worth it. Our newly remodeled space provides a better work environment, more privacy and dramatically improved efficiencies.

So it is with many things in life. What sounds simple in concept can take on a life of its own, infiltrating your routines with change and immeasurable challenge. Our remodel was an excellent case in point. We engaged in the process fully aware of what the result should be, yet mindful of the various challenges we may face. But with the help of our building design team, a good contractor and proven tools/techniques we were able to realize our dreams. The process of succession planning is no different; yet in many cases people take a haphazard and cavalier approach to the future of the operation.

A good plan starts with clear goals shared across the spectrum of active family members. We employ the right tools for job and elicit the succession intentions of active family members. The succession intentions for most families fall into three broad areas including:

1. Positioning the operation for generational transfer.
2. Preparing the next generation for a leadership role.  
3. Ensuring the family’s financial security.  

Like the building design team and the contractor, we employ proven tools/techniques to create a comprehensive succession plan to the specifications of each client family. We integrate the specific goals and individual aspirations of every active family member. Like remodeling the office, succession planning can be a leap of faith. Although the future is unknown and the benefits cannot be guaranteed succession planning and implementation will be pivotal in securing a lasting family legacy. 

The primary tool in the process is the Comprehensive Succession Solution. It is comprised of four planning components:

 

Financial Security – Current and projected cash flow is the key to planning success. Each affected family must measure the proposed succession plan and determine the ramifications on their financial security. Off-farm investments may help the family manage the economic cycles of ownership. Good financial management is imperative for lasting security. 

Management Continuity / Ownership Transition – Transferring ownership may be as simple as identifying tomorrow’s leaders, establishing a time frame for transition and defining the transfer methodology. In most cases we measure distributions, and establish an optimal transition plan. 

Leadership Development – Most next generation leaders have a solid education and good experience. They know the fundamentals and perform the requisite chores. Leadership Development, including people management, team development, project coordination, business design and professional growth, is critical to continuing growth and lasting success.

Estate Planning – Common estate planning techniques often compromise the integrity of an operation by granting ownership to inactive family member. An efficient estate plan is designed to maintain the family’s financial security, plan for equitable distributions and mitigate the estate tax liability.

Our Comprehensive Succession Solution is researched, devised and written through a well-defined six step process. It includes:

The consultation is designed to help the family recognize and then define common succession intentions related to the operation, the family and the owner. We explain the principles of good planning, and agree on a timeline for completion.

In the discovery phase, we collect emotional/factual information and examine your current familial, operational and financial situation. The quality and quantity of the information we receive will directly affect our recommendations.

The Preliminary Plan is an assessment of your current situation relative to your goals and objectives.   In this phase we detail our findings and recommend specific areas that may need to be addressed to meet your succession goals and intentions.

A final plan is drafted based on the results of the Preliminary Plan, suggestions of the family, continuing research and counsel of the respective planning team. Each plan may incorporate an implementation schedule with actionable steps to achieve the family’s succession goals

Implementation is the process of creating the legal documents, writing the financial instruments, adopting the accounting practices and learning the practicalities of leadership.

A succession plan must remain fluid to ensure successful results. It must adapt to the changing legislative landscape, business environment, societal structures and familial relationships. It must be applicable to a growing operation and provide room for opportunities.

As you consider the best approach for moving forward with your own “remodel” (succession plan), keep your eye on the rewards beyond the challenge. As Plato would say, “The beginning is the important part of the work.”

 

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