Small Business Succession Planning
It has been said that small business is the growth engine of the United States Economy. During a period of economic growth and expansion, small businesses create jobs at a much faster rate than large corporations or the federal government. But during periods of economic down turn, small businesses struggle to maintain full employment for its workers. Most small business resists the temptation to lay off employees due to the fear that they may not be able to replace them if business turns quickly. Small businesses fail for any number of reasons including, cash flow, product failure, competition, and mismanagement. One of the most avoidable reasons a small business fails is due to the lack of proper leadership succession planning by the owner or founder. This type of failure most commonly occurs in family owned small businesses or limited partnerships. When a successful small business fails because the owner or founder is no longer able to lead the enterprise, the resulting loss of jobs lands more people on the unemployment lines. The United States unemployment rate remains at an historic 9.1% unemployment at the end of September 2011. The economic and employment outlook is not nearly as positive as many had hoped at this stage of the recovery. Major corporations continue to squeeze labor to improve profits, and announce layoffs in advance of quarterly earnings reports. Some large companies even resort to announcing labor reductions and layoffs well into the foreseeable future. Bank of America announced the layoff of $30,000 workers over the next few years according to the Charlotte Observer, Friday September 2, 2011. With many major American and European financial banks and institutions struggling to grow profits and satisfy investments, developing new job opportunities and employment growth is the last and least favorable business initiatives these large corporations will consider. For the large corporation, it is a matter of survival. The only way for the large public corporation to survive is to continue to provide a reasonable return to the stock holders. Cutting jobs and restricting labor cost can be a viable way for the large, publicly traded corporation to cut cost and improve profits. In contrast, the small business survives because it returns enough profit to maintain existing business and expenses, and it continues to have a market place to grow. Unlike large corporations, the small business enterprise relies heavily on people and employees to fuel growth and perform its business function. Small business represents the best opportunity to expand employment opportunities in the United States and provide the most consistent path to move the employment rate down to the 4-5% rate the United States enjoyed before the Wall Street Financial meltdown and subsequent recession in 2008. When the government reports the jobless numbers on Thursday each week, they make an important distinction between public job growth and private sector job growth. Large public corporations report the number of new hires, but small businesses are too busy trying to turn a profit to report weekly employment numbers to the local government. Once a small business is well established, and the ownership has the experience and wisdom to stay in business for more than twenty years, the greatest risk to the survival of the business is the failure to develop a succession plan for the inevitable death or retirement of the company founders and owners. Without a well developed succession plan, many small businesses cease to exist. Many of the small businesses fail after the owner or founder leaves because they leave the business to an heir who does not have the proper training, experience, or passion to carry on the vision of the founder or move the small business in a new direction. Many of the successful small business fail during the first few years after the owner or founder...
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