Succession planning: Women face exit challenges

| Print |  Email
Thursday, June 01, 2006

By Gisel Hillner, KeyBank

They’re entrepreneurial, efficient, multitasking mavens who are shattering the glass ceiling by calling the shots in the workplace. They’re women who own their own businesses. Over the past 20 years, the growth of women-owned businesses has outpaced growth among businesses in general. Women-owned businesses are a boon for the economy, providing 19.1 million jobs and generating nearly $2.5 trillion in sales. Fastest growth is in construction, agribusiness, transportation and telecommunications. With this expansion of businesses, a growing number of women business owners are being confronted with the challenges associated with exiting the businesses they have built — in short, making sure that their “baby” is in good hands.

According to recent data from the Center for Women’s Business Research, a quarter of all women business owners do not have a succession plan in place, leaving their businesses vulnerable to potential acquisitions, disputes of ownership or business failure. The primary strategy of the remaining three-quarters of women business owners is to sell all or part of the business, according to the center. Just as women need to establish an effective business plan before they launch a business, they also need to implement a succession plan so the business runs smoothly after they’re gone.

PREPARING THE PLAN: Before designing a business succession plan, business owners should consider several factors, including: nature of the business, number of owners/ shareholders, age and health of owners, financial condition of owners, value of entity, prospects for purchase, state law.

When preparing a business succession plan, owners should think about what their personal goals would be if they weren’t involved in the day-to-day operations of a business, and what, if any, role they see themselves playing in the business.

Another important consideration for owners is the establishment of a living will, which states their wishes for end-of-life care should they become unable to make those decisions themselves. Owners should also have a potential successor in mind to operate the business should they become unable to do so. Above all, a succession plan should be documented, or written, ideally in tandem with an owner’s successor. A partner could agree to offer a right of first refusal when the owner exits, but if nothing is formalized and the owner’s family is making a decision in her place, the family may choose the highest bidder.

In addition, plans should include a company’s growth and expansion goals, as well as plans to introduce any new products.

WHEN TO START PLANNING: Business owners should start planning as early as possible. While they should certainly strive to make a long-term plan when they are still healthy and vital enough to actively participate in all business decisions, it is vital to plan for the unexpected.

What would they do if they (or their partner) suddenly became disabled or died? If their partner became unable to participate in the business, would they want their husband or child to fill that role? How would their family survive if they suddenly passed away and that family needed liquid assets to pay taxes and final expenses, not to mention ongoing cash flow?

Owners should also establish a reasonable timeline for transferring the business. According to the Small Business Administration, some succession consultants recommend a three- to five-year plan, while still others counsel owners to create a 10- 15-year plan. By allowing sufficient time for planning, business owners can evaluate potential successors in various roles, and determine whether these individuals have the commitment, maturity, and drive necessary to succeed.

Owners should consider the following when preparing the plan:

  • Can the business be transferred?
  • To whom should it be transferred?
  • When should it be transferred?
  • How should it be transferred?

Also keep in mind that various transfer options exist. The broad categories include: gift of business interest, sale to third party, sale to employee and sale to co-owner.

Business owners who establish a comprehensive succession plan and know their options will enjoy stronger financial security along with the priceless peace of mind that comes from taking care of business.

— Gisel Hillner, KeyBank
relationship manager, Portland
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

More Articles

Loose Talk

July/August 2015
Friday, July 10, 2015
BY AMY MILSHTEIN

When gossip crosses the line.


Read more...

Storyteller in Chief: Power Player

September 2015
Wednesday, August 19, 2015
BY LINDA WESTON

In 1996, after a 17-year career in the destination marketing industry, where I gained national standing as the CEO of the Convention & Visitors Association of Lane County, I was recruited by the founders of a new professional basketball league for women. The American Basketball League (ABL) hoped to leverage the success of the 1996 USA women’s national team at the Atlanta Olympics — much like USA Soccer is now leveraging the U.S. Women’s National Team’s victory in the World Cup. The ABL wanted a team in Portland, and they wanted me to be its general manager.


Read more...

Store Bought

July/August 2015
Friday, July 10, 2015
BY LINDA BAKER

Market of Choice is on a tear. In 2012 the 35-year-old Eugene-based grocery chain opened a central kitchen/distribution center in its hometown. The market opened a third Portland store in the Cedar Mill neighborhood this year; a Bend outpost broke ground in March. A fourth Portland location is slated for the inner southeast “LOCA” development, a mixed-use project featuring condos and retail. Revenues in 2014 were $175 million, a double-digit increase over 2013. CEO Rick Wright discusses growth, market trends and how he keeps new “foodie” grocery clerks happy.


Read more...

Reader Input: Energy Overload

June 2015
Wednesday, July 15, 2015

We asked readers to weigh in on the fossil fuel-green energy equation.


Read more...

Light Reading

September 2015
Thursday, August 20, 2015
BY JACOB PALMER

Ask any college student: Textbook prices have skyrocketed out of control. Online education startup Lumen Learning aims to bring them down to earth.


Read more...

Farm in a Box

July/August 2015
Friday, July 10, 2015
BY JACOB PALMER

Most of the food Americans consume is trucked in from hundreds of miles away. Eric Wilson, co-founder and CEO of Gro-volution, wants to change that. So this past spring, the Air Force veteran and former greenhouse manager started work on an alternative farming system he claims is more efficient than conventional agriculture, and also shortens the distance between the consumer and the farm.


Read more...

Reader Input: Fair Play

May 2015
Wednesday, July 15, 2015

Former Governor John Kitzhaber's resignation in February prompted some soul searching in this state about ethical behavior in industry and government.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS