Plan Now or Pay Later (Hunter Field Editor’s Note)

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Two-thirds of family businesses in the United States have no succession plan, PricewaterhouseCoopers found in 2023.

More alarming: The Exit Planning Institute found later that same year that 76% of business owners plan to transition in the next 10 years, but only 17% have a transition plan.

The data tracks with my experience. I ask business owners often — as does the Arkansas Business staff — about succession and exit planning. The prevailing response is an uncomfortable attempt to change the subject.

I’m not sure why there’s such a reluctance to discuss the topic. Maybe it’s one of those subjects that is more readily discussed when one of the parties to the conversation isn’t a journalist, or maybe it’s because the topic often forces us to face our own mortality.

Or perhaps the answer lies in that statistic — business owners just aren’t thinking about it.

And yet, a successful succession is the capstone of building a successful business.

In Arkansas, family-owned and privately held businesses are the backbone of our economy, and exit planning can be the difference between lasting success and failure. It’s also a certainty; you will leave your business — whether by choice or circumstance.

It’s not just about picking a successor or drafting a sale agreement. It’s about preserving the value of what you’ve built and protecting employees and customers. Without a plan, businesses face avoidable risks, from leadership vacuums, loss of market confidence, family disputes and possible bankruptcy.

It’s not just the businesses that stand to suffer; the communities who buy their products or services and the local economies that depend on them also stand to lose.

Paul Osborn, a partner at HCJ CPAs & Advisors in Little Rock, offers some helpful advice in this week’s Executive Q&A.

For most family businesses, the process starts with preparing future leaders for all the administrative and management challenges to come. For those private companies that plan to eventually sell, it’s never too early to start getting your ducks in a row. That means understanding the roster of possible buyers and getting your accounting in clean shape.

Osborn also points out something that may be the most challenging for business owners who have spent a career building their companies into something special — making themselves replaceable. Because who wants to buy a company that is dependent on one man or woman at the top?

I think most of our businesses in Arkansas want to be good corporate citizens, and I think sound succession planning is a big part of that. We have so many strong companies with strong, forceful leaders who are reaching retirement age.

Succession and exit planning is not about giving up; it’s about building something that lasts beyond yourself.

Email Hunter Field, editor of Arkansas Business, at hfield@abpg.com