What is the future of a business when its current generation of ownership and leadership moves on?
That was at the heart of a recent seminar where the Holmes County Economic Development Council and Holmes County Chamber of Commerce united to host Succession Planning: Does Your Business Have a Plan on Jan. 23 at Comfort Inn Suites in Berlin.
Attended by many area business and organizational leaders, a trio of speakers provided insight into the importance of planning ahead and providing a guideline for the next generation of leaders.
The event was coordinated and hosted by Mark Leininger, Holmes County Economic Development Council director, and he said bringing this event to the community was critical because of the sheer number of family-owned small businesses that make up the majority of Holmes County’s business and economic landscape.
“We have discussed doing something together for some time that focused on a relevant topic, and one of the things that I’ve always been concerned about is that small business plays such a vital role in the Holmes County economy and in our communities, and if there is one Achilles’ heel, it is that there is no inherent mechanism for continuation of many of our small businesses,” Leininger said. “As business owners, we have to be prepared for the next step when we are ready to leave because these small businesses are the backbone of our economic community. If that doesn’t happen, nothing good can happen to the business.”
Leininger said the event wasn’t created to be a detailed moment where people could get specific answers of when and where they should plan out their succession strategy but rather as a starting point to get people thinking about the process and spurring them to actively seek out individuals and firms to help them get the process started.
In doing so, Leininger lined up three panel speakers who provided a range of business and succession skills and knowledge.
The three keynote panelist members included Ernest Hershberger, owner of Homestead Furniture, Abner Henry and Dutch Design; Rachelle Lewandowski, a CPA with Rea & Associates and the senior manager at Rea’s Millersburg office, where she has helped clients better understand the need to be prepared for succession; and Garrett Roach, attorney and member of Critchfield Law Firm, where he has specialized in helping clients navigate the complexity of succession planning.
Leininger utilized several reports focusing on Holmes County, noting Holmes County consists of 1,500 business enterprises and 19,500 employees and boasts an annual payroll of more than $1 billion, but 95% of Holmes County’s businesses have fewer than 50 employees, meaning the county is made of many small business owners, with many of those being family-operated.
“Business owners have to be proactive in planning what will happen when they exit the business,” Leininger said. “This process isn’t just important for the business owner and their business, but for our entire community.”
In doling out their expertise, the panel went over a series of predetermined questions that were submitted by attendees.
Roach began by simply defining what succession planning is and what it consists of.
“It’s the process of preparing the business for the transfer of ownership or management to a new owner or successor,” Roach said. “In our case (when talking about small business), most of the time ownership is synonymous with management, and that means developing key people who can take over the operation.”
He said succession planning could be to a child, spouse, employee or a buyer and could take place at retirement, as a gift, sale or stock bonus, or there are times when the passing away of an owner determines the succession plan going into place.
The list of topics included questions like why business succession planning is critical, when should one begin to prepare, what steps are involved, who should be involved in the process, what are the consequences of not preparing, what legal steps are necessary, advice for nonprofit organizations and more.
“This is so important because as a business owner, you’ve spent your lifetime building this business,” Lewandowski said. “You want to preserve your legacy, and the way to do that is to have a plan, and plans evolve and change over time.”
She said continuing to revisit the succession plan once it is in place is a must because it impacts many people as it plays out.
“Without a plan you’re sure to fail,” she said.
Hershberger said few people like the idea of talking about succession planning, noting it is very hard work, but work that is of the utmost importance.
He said a solid step is creating folders to place important thoughts and ideas into as one works through the thought process, something he said was needed because great ideas don’t all come at once.
All three panelists said it is never too soon to initiate a succession plan, nor is it ever too late, but setting the wheels in motion as early as possible will make the process easier.
Lewandowski said owners need to be patient and flexible and view this process as an investment.
Hershberger said one word describes what takes place when succession planning doesn’t happen.
“Chaos,” Hershberger said. “There are a lot of intertwined things going on when someone plans to move on and a chance there will be a tremendous amount of stress, regardless of whether there is a plan in place or not. But with no plan in place, it will be chaos.”
Roach also said putting a buy-sell agreement in place is a good idea.
“If you’re going to have co-owners in your business, you have to have this in place,” Roach said. “It’s absolutely critical, and it needs updated often.”
All three panelists agreed communication and preparation are vital in preparing for succession because it is nearly impossible to prepare for all outcomes in life.
Leininger said at some point all owners will leave their business, which is why he felt it was of great importance to make sure people understand the value of being prepared for the next generation of ownership and leadership in the county’s small business community.
