Your succession plan may need tweaking

The intensity will vary, but the thought probably has been in and out of your mind from those early entrepreneurial days: Who is the best person to take over the business if something happens to me?

The urgency to answer that question likely will be different for a 30-year old business owner than for a 50-year old, but the importance of having "a thoughtful plan so succession happens in a seamless manner" matters in many ways, says John Paul Sweeney.

Think taxes - which, depending on your business' structure and value, can be significant. Think retirement cash flow. Think avoiding family squabbles over who gets what, if there's no plan.

Happily, succession plans are less likely than ever to be relegated to a dusty shelf. Instead, plans are reviewed - and tweaked as circumstances change.

"Think your plan through," Sweeney says. "Put it in writing, then come back to it a few days later. Chances are, the third draft will be completely different than the first."

Sweeney is vice president and chief trust officer at Itasca Bank & Trust Co., where careful succession planning involving two families and a history that can be traced to the 1890s has kept the bank on a steady path.

A steady path isn't just for bankers. A succession plan that smooths the way to the future is as important to a small consulting firm as it is to a larger manufacturer. The issue is creating the path.

Two of Sweeney's suggestions are especially helpful:

• Make certain you're getting "the right type of counsel," Sweeney says. "That advice could come from someone with good common business sense, from your CPA or attorney."

• Be open to tweaking the plan. In fact, Sweeney says, "Tweaking the plan is critical. There may be eight drafts because circumstances change" and the plan needs to recognize new situations.

Ideally, your successor is chosen early enough to be well-groomed and ready to take over, Sweeney says. Whether the successor is an employee, the owner's spouse or a daughter, Sweeney suggests that the communication to employees and within the family regarding the choice needs to be carefully planned.

Suppose, Sweeney begins, you have three children - each with different traits. "Barbara gets the business, but the other two get financial settlements. That's an example of a situation that makes communication, especially with the two who do not get control of the business, especially important," Sweeney says.

Children don't always want to be involved - and sometimes shouldn't be. For example, Sweeney tells of a cry for help from an owner-Mother, who lamented, "My son will never make this business grow. What should I do?"

To Sweeney, the answer was obvious in Mom's "My son will never ..." statement - an example of Sweeney's belief that "Writing things down will help you formulate your thoughts."

Ultimately, your succession plan should go to your adviser for a frank discussion of what might be missing.

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