4 Steps to Build a Succession Plan for Your Plumbing Business
Did you know that 43 percent of family businesses have no succession plan? Even if you plan to keep your plumbing business within the family, you need a succession plan just as if you are planning to sell. For any business, succession planning helps to ensure the company’s value well into the future – and for contracting businesses like plumbing companies, this means building a plan to preserve the business’ value for your current employees and technicians, your customers, and yourself.
- Start Making a Succession Plan by Laying Out Goals
Think about the future of your plumbing business. What will help to ensure its continued success? Are you passing it on to family members, existing employees, or selling it? No matter where your plumbing business will go next, clearly identifying your goals for both yourself and the business will help you make key succession decisions.
- Choose Successors that Align with Your Goals
Not only will the right successors help your business and existing employees thrive, but you too can benefit financially through royalties (and stability, if the business is staying within the family). While it’s important to be firm about the goal, always remember to be flexible about the path. In other words, your successor may run the business differently, use different methods, rely on different best practices, but if the goals are aligned, the business can still succeed.
- Thoroughly and Accurately Valuate Your Company
Especially if you’re planning to sell your company (but even if you’re not), always obtain an accurate valuation of your company prior to succession. Enlist the help of a Certified Public Accountant and a lawyer to help you handle and thoroughly document this process, and take into account all of your plumbers, equipment, facilities, and other assets.
- Make Sure You Understand the Deal
Be specific. Hire a lawyer. Read the fine print. Even if you’re keeping the business in the family, the future of your company relies on accurate and well-planned succession. As of 2012, just 15 percent of small businesses survived succession to a second generation, and only five percent survive to a third. Does your plan for succession minimize taxes? Are you keeping the business in the family and using a cross-purchase or entity purchase agreement? Plan the deal like the business depends on it (because it does).
For small business owners, embarking on the journey of building a succession plan often involves the help of legal experts and advisors. For contracting business like plumbing companies, which often are close-knit or family-owned establishments, finding an experienced succession guide is essential. Franchisees with Mr. Rooter have access not only to resources that help them throughout the life of their business, but guidance through the process of succession as well.
The Dwyer Group has plenty of personal experience with succession, and has even been recognized for its accomplishments including succession triumphs. Contact a franchise developer today to learn more about business guidance for the entire lifecycle of your plumbing business.