3 minute read

What HBO’s Succession Teaches Business Owners About Securing Their Wealth

Keep reading to find out some helpful tips about securing wealth, taught by HBO’s Succession.

Rianka Dorsainvil

Rianka Dorsainvil, @Rianka_D

CFP® & Co-Founder, 2050 Wealth Partners

Fall television is back - and with it, the highly anticipated arrival of fan-favorite, HBO’s Succession.

While I hope that the daily operations of your business does not match the cut-throat nature of the Emmy Award winning program, nonetheless, the lesson remains clear: succession planning remains an important step in securing your wealth, and there are major pitfalls to be aware of before the process starts. 

Passing the baton to the right individual can ensure a business will run smoothly once key leaders have retired, passed away, or moved on to other opportunities. This decision can rank among one of the highest human capital management tasks; the decision is crucial to the longevity of the company. Careful planning will assist making these critical decisions and help to promote a fluid transfer. 

As the HBO series demonstrates, choosing a candidate to take over a high performing company can be a daunting task, especially when you have to choose between family members. People can quickly formulate personal agendas to slip into the director’s seat and throw your decision off course. Not only can choosing the right candidate ensure a business’ continued success, but planned development training prior to transfer can assist in tremendous growth in the future. 

Three Building Blocks to Remain Protected

Choosing a successor is challenging. Not only will you need to have a solid strategy for how you are going to make your decision, but you will also need to have a back-up in case your candidate falls through. Remember back to the days when you may have risked it all to get to where you are today. At that stage in your life, who would you have wanted to take over your hard-earned creation? 

Step 1: Gather Your Questions

The first step in protecting yourself is meeting with a financial wealth advisor to discuss the specifics of your situation. Sitting down with an advisor will determine the next steps to the process, so this is the most important place to start. Here you will begin to create your Estate Plan and take a look at your personal finances to determine and assign assets. Questions you may have: Are potential successors family members or friends? Are you actually ready to step away from your role? Is selling your business the best option? How will the cash from your business affect your retirement plan? 

Step 2: Design Your Exit Plan

Once you have wrapped up your personal finances, you will need to establish a well-designed exit plan. This will likely include wrapping up a variety of loose ends before your final departure from the business. You can include specifics like timing of your departure, where you stand on your personal financial goals, facilitation for your retirement, extending the period of employment for the maximum tax benefit for your business, and strategies for long-term growth that you will leave behind. Be sure to have those details fully documented.

Step 3: Prepare Your Departure

When you complete these steps, you will be ready to start working on details of your exit. Be sure to outline any tax related provisions and technical questions with your account, alongside your larger financial team. You will then want to draw up an operating agreement to protect the transfer of ownership for the future of your company. Lastly, gathering tools for the transfer of ownership will ensure you have protected yourself from every end of the spectrum. 

Five Pitfalls to Avoid

While you will want to take the proper steps in succession and exit planning, you will also want to prepare for any pitfalls that may occur in the process. After all, if you are a business owner, you likely have a lot of personal net worth tied up in the growth strategy and need to make sure you are choosing the best candidate for the role. Here we have outlined some pitfalls that occur more than others to prevent wasted planning time and resources. 

1. If Top Candidates Leave - It happens every day. You are hopeful that a particular employee will assume the leadership role, but they move on to take an opportunity with another company. Having conversations with these individuals as soon as you have selected them as a candidate is the best way to keep them retained. 

2. Solely Depending on Human Resources (HR) - Senior leaders should be navigating succession strategies and openly communicating those strategies with HR, but not relying on their sole input. Leaning on HR to choose candidates for succession roles is challenging, because they do not necessarily see the work ethic, demeanor, and communication style of every employee they manage. 

3. Deferring to the Old Way of Doing Things - We are in an era of resilience. Adapting new models for prospective successors should be formulated uniquely to the position. Can your ideal candidate take the long-view? Are they progressive enough for where the future is headed?

4. Refuse to Use Complex Systems - Setting up your strategy for succession planning should not be more complicated than it needs to be. Although you want to employ various tests for the best candidate, it is possible that you can add too many layers to the process and discourage employee interest. If at all possible, strive to keep it simple. 

5. Employ Consistent Methodology - When providing individual performance feedback throughout the course of employment, using the same methodology is imperative in achieving the best results. Research the best ways to approach fighting biases and consider a grading rubric that levels the playing field for all candidates.

The bottom line: investing in your human capital management practices now will prove the best dollars an organization can spend, and save on time and frustration in the long-run. By building a strong company development program and planning for your future alongside your Estate Planning and financial teams, you can find better overall employee retention rates and a clear winner for your company’s succession plan.

Learn more about how Trust & Will can help you create or update your Estate Plan today. 

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