Jim Russell of New Direction Partners on succession planning
Published on December 13, 2010
Succession planning is important in any business. JIm Russell, a partner with New Direction Partners is here to tell us some key factors to look at in succession planning.
Cary Sherburne: Hi, I’m Cary Sherburne, Senior Editor at WhatTheyThink.com, and I’m here with Jim Russell, who is a partner at New Direction Partners. You guys do a lot of different things, but one of the things you do is counsel people on succession planning, right?
Jim Russell: That’s correct; we do.
Cary Sherburne: Maybe you could tell us something – I don’t want to give away all your trade secrets, but maybe you can tell us a little bit about what people should be thinking about in terms of the next generation of management.
Jim Russell: Well, we think the first step in good succession planning is to start early, maybe two to five years, but before you want to make a transition. And really, number one is to determine what your own personal goals are. Do you want to exit the business and have no ownership any more? Would you like to have some ownership that’s transitioned to just the management of the company? And so once you determine that, you can start working on a plan and decide where you want to go with your succession planning.
Cary Sherburne: And a lot of these are small family businesses. Right? So what happens when the family, the kids, don’t have any interest in the business or don’t want to move on? What happens?
Jim Russell: Well, that’s certainly one of the first keys you have to determine is, do you have a family member that wants to be involved in the business? Are they qualified to run the business? And if not, then you have to seek an alternative. And an alternative may be, may be you’ve got a management person or people who you really trust and you’re comfortable handing over the business to them. That’s viable if you want to maintain ownership. And of course, another option is to just outright sell the business.
Cary Sherburne: And so, if you look at kind of what you see going down in the marketplace, what percent of the businesses would you say are actually moving into another generation of the family versus saying, you know, I just want out. Let’s sell it.
Jim Russell: I don’t know a number, Cary, but I think that in today’s market, we’re seeing a lot more people who are wanting to get out of the business and they’re selling to a competitor or someone else in the industry rather than passing it on to a family member. That’s not to say it’s not happening, but I think that option is declining.
Cary Sherburne: You know, if there is a family member, it would seem like you would want to even start earlier than the two to three years you talked about. I remember talking to somebody recently who was trying to help a friend, third-generation printer, you know, figure out some strategy and he said to me, “Well, this a third-generation business, I’m sure they know what they’re doing.” And I’m like I don’t know that I would assume that. You know, so, I mean to be able to groom the kids that are maybe going to take over even back further than the two to three years.
Jim Russell: Absolutely. I mean, I think certainly you’d be grooming the kids if they have an interest much sooner than that, but I think the actual planning of moving yourself out of the business is a two to five-year process and so that’s what we’re referring to.
Cary Sherburne: Yeah. That’s great. So that’s good advice for folks and we appreciate your sharing.
Jim Russell: All right, thank you. Nice meeting you.
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