Dinesh Hasija, Ph.D. (photo courtesy of AU Hull College of Business)
Like many U.S. cities, Augusta is experiencing an aging population. This trend impacts local businesses in several ways, from hiring a qualified workforce to business owners’ succession planning. This article will focus on how business owners can successfully navigate their succession planning.
Retirement can be an emotional stage for business owners who have built a socio-economic wealth throughout their time. However, when business owners are planning their retirement, the majority of focus is on economic wealth, and less on social wealth. Like all individuals, business owners are also looking for financial independence in their retired phase of life.
Unfortunately, business owners often do not consider the societal impact due to business. For instance, my 75-year-old neighbor owned a local grocery store in a neighborhood close to downtown Augusta. Five years ago, he decided to shut down his business and put a sign outside his store “Gone Fishing.” While enjoying retirement, this business owner often feels that his decision negatively impacts his regular customers as they still do not have another grocery store in that neighborhood.
How could business owners better plan their succession to avoid this void and preserve their social recognition in society? There are several options business owners could consider as they approach retirement age. An obvious option, especially for family-run businesses, is to pass the baton to existing family members. Family businesses often move from one generation to another, but children are ambitious and may want to pursue their own career paths.
If you do not have a family heir-apparent, you may consider the following:
- Groom a professional manager/CEO – this process could take years to train and build trust in the professional manager, or
- Selling your business.
There are pros and cons to these other options. For example, the grooming process could take years to train the manager as well as build trust and relationships. However, selling your business may be faster and less disruptive to your employees. The downside is that the sale of the business could be influenced by the cyclical nature of the market.
There are many different options, but the sooner you start planning for these options, the more you will be able to preserve your economic wealth and social recognition as you move towards the retirement phase of your life.
