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Business Succession Planning Is Critical For Company Founders

By Ken Laino on March 29, 2016
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An article in the New York Times on March 24, 2016, emphasizes the critical need for succession planning in closely held companies. While business succession planning is important at various levels, the fall–out for companies that lose a founder can be particularly bad.

The article notes that most small businesses are family owned, and those companies frequently fail to survive an unexpected death–unless a relative or other insider is trained and ready to take over immediately. A business frequently ends up getting sold for much less than it would have been worth if the owner was there.

Research by two economists—Sascha O. Becker and Hans K. Hvide–used data from Norway, which apparently keeps extensive records on companies and their founders. Their studies show that the fall-out for a closely held business was significantly worse for a company that lost a founder than for one that lost a non-founder CEO. Mr. Becker is quoted as saying that the greatest surprise for him in this study was that the negative effects of the death of a founder can continue (and in some areas even intensify) five or more years after the founder’s death.

This article in the March 24, 2016 New York Times business section is simply another reminder that the time and effort spent on succession planning will very likely be worth it in the long run. Having some sort of succession plan for your business is an integral part of any plan to ultimately protect its assets.

  • Posted in:
    Corporate & Commercial, Corporate Finance
  • Blog:
    Asset Protection Law Journal
  • Organization:
    Schneider Smeltz Spieth Bell LLP
  • Article: View Original Source

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