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Using Industry Research to Address Succession Planning

Posted June 14, 2019 by Nicolle Bouffard

This week, I read an article that got me thinking about the importance of succession planning for business owners. The article, entitled “CFOs not doing enough succession planning,” referenced a study conducted last year, which revealed that only a third of CFOs surveyed said that there was a succession plan in place for their roles. Perhaps even more startling was that over 80 percent of CFOs who responded to the survey said there was no internal successor prepared to take over for them.

Mind the talent gap

As a former banker, I witnessed this very issue with many of my business customers; they simply didn’t have the talent in the pipeline in order to fill important leadership roles when they become vacant either through executives leaving, retiring, or dying.

As I read our Industry Profiles, I see that succession planning, or lack thereof, is still a major challenge across numerous sectors. Just a few examples from a search of the Vertical IQ site:

  • Optometry Practices
    Risks to Watch Out For: Staffing Shortage, Management Skills, High Turnover, Unclear Exit Strategy
  • Dental Practices
    Risks to Watch Out For: Potential Staffing Shortages, High Staff Turnover  
  • Fine Arts Schools
    Risks to Watch Out For: Finding and Retaining Qualified Instructors, High Turnover
  • Commercial Brokers & Property Managers
    Risks to Watch Out For: Dependence on Key Talent

Whether it’s retaining good talent, accessing qualified talent, or dealing with high turnover, this is clearly an issue that impacts numerous industries. 

Advising on succession and exit strategies

So, what can you as a financial professional do to help your clients who are confronted with these staffing and talent challenges? First and foremost, I recommend that you review the “Business Valuation” data on the Industry Profile for your client’s sector.

Using this industry-specific valuation information, you can initiate a conversation with a business owner who may be thinking about what their exit plan options are when they retire: giving the business to a family member, selling their portion to a partner, an employee stock option plan (ESOP), etc.

>> Related: The Most Valuable Advice Financial Pros Can Offer to Business Owners

Understanding how the client’s industry is performing will determine, at least in part, the availability of someone who would want to buy the business, but whether there is a competent partner to take over the business is also a consideration that factors into a business owner’s thought process about exiting. That business is their baby, and they want to be sure it will be in good hands once they aren’t there anymore.

That’s where the management skills and the staffing fits into the big picture plan, and industry intelligence is part of that. Initiating a conversation with a business owner about succession planning and exit strategies, and showing that you have knowledge and data that is specific to their industry, can open the door to a deeper relationship with that owner and their business, both now and into the future.

Tags: bankers, small business owner, accountants, CPAs, business owner, advisor, successionplanning

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