Retail Observer

RETAILOBSERVER.COM MAY 2014 40 W hen I last wrote about succession planning in 2010, it seemed to be a looming challenge for independent retailers. Now, it's time to sound the alarm. In a recent conversation with one of the industry's banking partners he estimated that the owners of nearly half of all locally-owned appliance, bedding, electronics and furniture companies were nearing retirement age with absolutely no plan for succession. The reality of that bad news is that historically, when an independent closes, their market share does not go to the other main street merchants but instead, to the big box stores. As one of the biggest cheerleaders for the independents, the thought of only half as many to choose from is a frightening scenario. In my experience, I've only seen five paths for retirement: • Transfer to a family member • Sell to a key employee • Sell to employees (ESOP) • Find an outside buyer/investor • Liquidate and close the business None are easy and they all take significant thought, effort and planning. Here are some of the most common reasons I find that owners either delay or completely ignore the need for succession planning: • I have plenty of time. You say you never want to retire. You'll die in the store. Is that really what you'll want in 10, 15 or 20 years? Planning for succession doesn't mean you're doomed to your recliner but it does give you more options. • Giving up ownership means I have to give up control, income and benefits. An owner may still run a business and be paid for that role without the loss of title or any of the other satisfactions of operating an independent business. However, the earlier a business owner begins transferring ownership to a successor, the likelier it is for a succession plan to be a success, both emotionally and financially. Business owners who think that creating a succession plan isn't worth the trouble are likely people who have never considered the potential long-term tax advantages of passing on a portion of ownership in the early stages of a long apprenticeship. • My kids will take it over. Recently a very profitable independent shut its doors when the 65 year-old owners found out that the son who had worked with them for 25 years had no intention of staying on after they retired. He loved working with them, but didn't want the responsibility of running the company without his folks. They always assumed he'd want to own the company they built together. They never discussed the future. Are your kids competent? Do they share your vision? Does your business play to their strengths? Are they interested in being a part of the family enterprise—or do they feel obligated? Will they build on the reputation you've established in your community? Are they credit worthy? Can they get a line of credit on their own if something happens to you? Have you done tax planning for them? What will happen to your business if there has to be a liquidation to pay your estate taxes? • I'll just sell my store. Really? Selling a closely-held business is no easy task. There aren't a lot of buyers out there. If you do want to sell, what's your plan? Are your financials in order? Do you strip all the profits out of your business to avoid paying taxes? Do you run personal expenses through the business? Are you willing to spend the money to have your accountant prepare a reviewed or audited financial statement to give to a prospective buyer? Do you want your accountant or buyer to start contacting your suppliers, your buying group and your customers? For most small business owners your company is your biggest asset. You spend your life's energy nurturing it to make it grow and prosper. You agonize over its ups and downs. The successful transition of your business will have the biggest impact on everything you've done so far. It's your legacy. Don't ignore it. This may be the biggest opportunity you have to leave your mark. Make it a priority today. Elly Valas Retail Views SUCCESSION PLANNING: FOLLOW UP-DATE Elly Valas is the Marketing Services Director for Nationwide Marketing Group. She can be reached at elly@ellyvalas.com or at 303-316-7569. Visit her website at www.ellyvalas.com. RO

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