At some point, we all must hang up our hard hats. But what will happen to your construction company when you retire? Or when you simply can’t work for an extended period, because of illness or injury? Having a succession plan in place is key to ensuring the business will go on.
Even if you’re not close to retirement, it’s a good idea to start planning early. Well-executed succession plans often take years to implement.
One of the best ways to begin building the framework of your succession plan is to determine “what you’ve got.” You know you own a construction business, but how much is it worth and what are its primary value drivers? To determine these things, engage a qualified valuation expert familiar with the construction industry.
In addition, clearly outline your goals for retirement. That is, do you intend to retire outright or gradually retire by, say, moving to a part-time schedule? Some business owners step down but keep a seat on the board of directors.
Be sure to include all stakeholders. Discuss your succession plan with family members and, if appropriate, key customers or business associates. Give them an opportunity to provide input and listen carefully to what they say.
You’ll also need to choose the best method to transfer ownership of the company, whether through a sale, stock gift, buy-sell agreement, trust or other option. It’s also wise to address retirement and estate planning — how will your succession plan help fund your retirement and provide for your family and/or heirs?
Another important step is revising your business plan to incorporate an eventual ownership succession. A business plan is essentially a baseline for monitoring progress and keeping the company on track. The targets laid out in the plan become performance goals, and regular reviews of the plan help determine whether those goals are being met.
The plan should also define the responsibilities of each manager and executive. Your construction company’s succession depends on the management team’s ability to understand and carry out the financial and marketing objectives of the business plan.
This includes setting up a program to identify potential successors who are able and willing to take over — whether they be family members, employees or third parties — and to develop their abilities and transfer knowledge to them. Training can include industry certification courses, leadership workshops and business management classes, as well as day-to-day mentoring and job shadowing.
A solid succession plan will require the input of outside advisors. Your advisory team should include a CPA, attorney and qualified valuation expert. Many contractors also meet with business consultants or brokers, insurance experts, and estate planning advisors as well.
Discuss your succession plan with family members and, if appropriate, key customers or business associates.
These experts can help you fine-tune the many minute details of your succession plan. When the time comes for you to step down, they can guide you through the execution process to minimize the financial risks and tax consequences of, say, activating a buy-sell agreement.
Very important project
Even the most skillfully constructed building requires regular maintenance and, perhaps, an eventual rehab to preserve it for future generations. So it goes with your construction company. As mentioned, the earlier you embark on your succession planning, the easier time you’ll have completing this very important project.
We welcome the opportunity to put our construction industry expertise to work for you. To learn more about how our firm can help advance your success, please contact Dave Wolfenden at (302) 254-8240.