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Dennis Had a Plan in His Head; It Hurt Him!

Updated: May 28

Dennis started his company years ago. He grew it from zero to ten million. Twenty-eight employees depend on him for their livelihood. His company plays a significant role in many local vendors. The business is very profitable but needs cash for growth.

Having a successful business has given Dennis a lot of influence locally and nationally in the media.

However, Dennis never took time to make an annual succession plan with advisors and stakeholders in his business. Then something bad happened.

In need of cash, he turned to an investor for a short-term solution that results in a long-term problem. In the end, Dennis finds himself working for someone else in his own business.

Private equity investors do this all the time. Entrepreneurs fall for it when they haven't taken the time to plan for the future of the business with a team of stakeholders.

Unlike Dennis, savvy entrepreneurs associate themselves with people who can do some aspect of the business and planning better than themselves. These people become their thinking partners in the business. This includes paid professionals like CPAs, attorneys, investment advisors, and your board (formal or informal).

You can expect to get what you pay for in these relationships. Good talent is expensive. Find an attorney adept in business planning. Find a CPA competent in valuation for your size and complexity business and trust them.

Imagine with me how it might have happened if Dennis had done things differently.

Let’s rewind ten years. Dennis struggles to understand a preferred picture of his future and the future of his business. He also challenges others to see how they want the picture to unfold.

He gets input from his family and a mentor. They know him and the values he has built his company around. This picture is dynamic. He adds and subtracts from it as they influence him.

Making the circle larger, Dennis consults his CPA and attorney. They share their experiences with him. The picture continually changes as they give him the accounting and legal expertise he doesn't have on his own.

With a clearer and more informed picture of a preferred future, Dennis shares it with his board. He presses them for their input. He pushes them for their preferred picture of themselves in the business's future.

Informally, Dennis has assembled a pool of possible successors to assume his role in the company. He observes them constantly and dreams of their future role in the business. Initially, he is cautious with whom he shares these names. Eventually, he will choose one.

Meanwhile, he is intentionally making sure this pool of possible successors is steeped in the values he wants to succeed him. It is vitally important that the purpose of the business be sustained. Dennis feels a responsibility to steward the influence that his profitable business has given him.

At the beginning of the new year, Dennis creates a working draft of this picture of a preferred future for his company. This working draft is dynamic and uses general terms that allow for fine-tuning over time. He keeps it to one page.

Each year, Dennis repeats this process.

Each year, the plan gets clearer.

After a few years, with continual input from his stakeholders, it grows to become a ten-year, five-year, and one-year succession plan.

Having brought a team of advisors into a planning process for the preferred picture of the business each year, Dennis doesn't get caught needing cash, accepting it from the wrong sources, and losing control of his business.

Because Dennis has a plan on paper, he is a better steward of the influence a profitable business has given him.

Don't get caught like Dennis, get my "Seven Pitfalls To Succession Planning." It is free, my gift to you! CLICK HERE

Harry T. Jones

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