Equity Based Incentive Plans

I really like John H. Brown's books and articles on succession planning...his new article indicates that when an owner is looking at equity based incentive plans as a way of getting an "ownership" mentality in his employees he\she should view the same in the context of owners exit plan.

ABSOLUTELY.....why would you plan anything for employee that would not be consistent with the owners desire to move out of the business...yet how often does this happen.................often times folks buy plans one year only to eliminate the same in the next year finding out the financial commitment does not equal the return that they hope they would obtain from their employees.

In working with clients I go through a step by step approach to figure out what the owner wants, the deadline for the goal, the people needed to accomplish the same, the employees who will "buy in" to the project and frankly, a growth plan that will allow for the employees to buy the business. You can not realistically have a "flat line" financial situation and expect to sell the business.

I try and try to get folks to have these types of conversations, but while we do have a considerable amount of time invested in these types of matters, rarely does it materialize....Why? I constantly think this is the toughest decision for clients...their mortality relative to thinking about turning over their business....easy for me to say as attorneys really do not have succession plans. Perhaps I am being too judgmental?

Succession Planning

In the continuing review of the Construction Magazine articles of April 2006 I must applaud the article on succession planning penned by John Huggins. Huggins asked the ultimate question I often deal with my clients….who is going to run your company after you are gone.  Succession planning is truly a real issue for companies and I see this time and time again.  Often an emotional issue,  it is terribly hard to figure out how to manage the transfer of the business.  The business seems to be considered one of the children by the owners, a “heir” that is not easy to let loose from the prying eyes of the father.  More often than not, the owner does not have the next phase of his or her life planned and I find that if there is no planned next steps for the owner that allows either retirement or or a new job, then the decision to pass on the business is often delayed or more often avoided altogether.  The angst on the faces of the number of owners I have worked with who want to transfer the business but can not do it is so troubling to all involved with the business.  The only thing worse is to see an owner fail to make the transition, leaving the company in disarray when no plan exists.  How have I dealt with this issue?  Well, I have adopted a 12 step program (hmm, wonder why he uses a twelve step approach) to deal with the issue but here is one key step I always want to insist on using….conducting taped interviews of employees requesting their thoughts on how the see the company evolving in the event the owner can not make the decision…..try conducting a round table of your valuable long standing employees by an outsider and see why type of answers you get…

Statistics on the sale of business

A preview of coming attractions...

Next year we will be presenting monthly teleseminars dealing with the all important issue of succession planning .... with that in mind I have some interesting thoughts to share...

Did you know: Two thirds of all businesses do NOT have a succession plan?

                       That most businesses either sell to their partner or their employees or close down operations, with only ten percent selling to third parties?

                       Most often the sale price is paid by way of a payment plan, not in one lump sum payment?

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These points will be highlighted during our conferences, and we will talk about how to go about dealing with this once in a lifetime decision...please join us in 2006 and bring your questions!