Smoky River Regional Economic Development
Now, more than ever, business succession planning is a vital part of community economic development.
Many of our small town and rural business owners are reaching an age when they are starting to think about retirement. When the economy was good succession, planning simply meant listing the business for sale and moving on.
When times are good buyers are plentiful and people are ready to invest in even the smallest of our communities. When the economy is slow, as it is now, fewer people are interested in investing money in an unstable economy.
The advantage to a slow economy is of course it is easier to hire workers. The disadvantage is profits are down and sales can be volatile. That can make it difficult to sell a business. Often what happens is an owner who has not made a succession plan will close down the business, paper up the windows and let the building stand empty.
This is not necessarily the best option for a business owner as he may be losing a reasonable profit from the sale.
From a town perspective, that does not look good. Most of our small towns and villages have a number of shops that are empty. The more there are the slower our community looks.
Business owners contemplating retirement in the next 10 years should start planning now for the retirement. This needs to go beyond the obvious of simply putting a for sale sign in the window.
One of the best places to look to for a succession plan is within the company itself. It is not uncommon to see a business taken over by a long-term employee, but this is more often than not happenstance and not careful planning.
The most obvious succession plan is to have one of the children take over the business. The challenge is this tried and true form of succession planning is far less common these days as kids move away and often pursue dreams different from their parents.
Nevertheless, we have examples of this right here in the Smoky region.
Existing employees are often excellent candidates to take over a business. They often have developed the skill sets required for running the business, they know the distributors, they know stock and they know the customers. They often have a vested interest in the businesses success as their paycheque depends on it.
What the often lack is the finances to buy the business. There are however, creative ways to get around that.
Offering a percentage in the business as opposed to a wage increase or creating a partnership with a long term and trusted employee are two viable options.
In some instances, developing a type of cooperative where two or more staff take over the business is also an option in business succession planning. Again, this ensures employees will continue to have employment and enable them to stay in the community.
While funding for these models may be challenging the local Community Futures office can often help with this process and with funding. Employees may also have other sources of dollars through family members.
An excellent source for succession planning ideas is the Internet. While not all of it may be applicable and can give a business owner new ideas on planning for retirement, whatever plan a business owner comes up with, it should be vetted by a professional business planner such as the Community Futures as well as their accountant or lawyer. The present economy requires some creativity and there are plenty of places to look to find it.