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The Value of People: Your Key Employees

September 30, 2015, 1

Young man standing by farm equipmentLegacyConnection

Kevin Spafford, CFP®

Too many business owners give too much credit to material asset value, plant, property, intellect, etc., and too little value to people and processes. The dollar value of a company is based on a whole bunch of variables most of which are easily measured in an appraisal, some of which are based on a gut-level feel and lots of experience. What if you could apply an appraised value to people? What value do your loyal employees bring? And, how much intellect do they bring to the work place that is a part of your culture and a key to business success?

Maybe you can measure the value of people and processes. Though it may be an inexact science, it will certainly give you food for thought and may even cause pause the next time you think business value is based on things rather than relationships.

Compare two separate appraisals. Value the business as a going-concern with all its assets, cash flow, accounts receivable, etc. Then compare that figure to its liquidation value---the amount a highest bidder will pay for used tools, racks, desks and tables after the lease is settled or the building is sold. Now subtract the going-concern value from the liquidation value and you may get a very rough idea of the worth that loyal employees bring to your business.

Absent the commitment of loyal employees, a business may not survive succession. Whether left in the hands of a well-prepared next generation or sold to a willing third-party, unless there are capable employees to carry on, the business simply will not make it beyond transition. The probability of survival may be slim if, when the owner departs, key employees leave instead of adapting to a new management structure.

A business succession plan should include strategies to identify and retain key employees. Even if there is a successor waiting in the wings to assume control when the owner retires, key employees will be necessary to ensure the business continues to grow and prosper. Key employees are not always limited to those in high-level control or management positions. Their ranks will be filled with people from every department and a host of capabilities including finance, marketing and/or operational positions.

Leadership for Growth: A quick self-assessment to rate owner, family and operational attitudes regarding leadership in the succession planning process. Rate your ability to navigate the succession planning process, creating a safe environment and allowing others to actively participate. Learn some of the key leadership concerns about ownership, family and operations in the succession planning process. Exemplify good leadership by taking action and following-through.  (eLegacyConnect tool available for public access - with no login required - through October 15, 2015.) 

Subscribe to LegacyConnection, our free weekly eNewsletter, for planning tips, tools, and more.

Note: We also invite you to follow Legacy by Design's company page on LinkedIn, highlighting a new succession-related topic each month.

Have questions specific to your family?  We’re always happy to schedule a complimentary phone consultation to discuss your family’s succession objectives, review potential next steps, and determine how we can help.

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