Succession planning is a huge challenge facing owners in the printing and graphics communications industry, and, as head of the NAPL Mergers and Acquisitions advisory team, it’s an issue that comes through our offices at NAPL on a frequent basis, but in a context that some may consider surprising.
Family-owned small businesses dominate the landscape of the printing and graphics communications industry. Many were founded by veterans in the post World War II era or by their baby boomer children. The next generation can be found in numerous companies that have been reinvented as the industry is being “redefined” (borrowing the phrase from my NAPL colleague, Andy Paparozzi). For these folks, succession planning is often the elephant in the room. It runs underneath critical ownership decisions such as capital investment, management development, and strategic direction.
Although succession planning affects so many owners and families, and is of vital importance, the topic earns front-burner status and remains an on-going process at only a handful of companies. Not coincidentally, many of those companies are “leaders” (as that term is described in NAPL lexicon).
Succession planning, or the absence thereof, is a factor in numerous financial disasters affecting owners in the printing and graphics communications industry. A common theme is lack of clarity in shareholder direction. “Have a clear vision of what you want to occur,” advises a second-generation printing executive who is literally days away from orderly liquidation and sale of intangibles. “If you don't have that clarity, seek help in getting it.”
Avoidance is another hallmark of “treading water” businesses. “Execute, do not delay,” commented the same frustrated individual, thinking how his parents dysfunctional decision-making directly led to the pending distressed sale. “By delaying, you only impede the next generation of leadership because their goals and ambitions will not be the same as yours.”
Rarely do owners invest time/money to develop and fully implement a sound succession plan that involves management and organizational development. It’s one of those things that is talked about, touched on, sometimes started, but rarely followed through on.
People can’t even agree on the meaning of the words “succession plan”! The phrase is used with various meanings by insurance agents, stock brokers, accountants, lawyers, business brokers, and countless management consultants. Wikipedia defines “succession planning” as “a process for identifying and developing internal people with the potential to fill key business leadership positions in the company.”
By the time I’m asked to counsel an owner and/or family on “succession planning,” it’s often in one of three contexts that cross into the world of M&A and business valuation:
- “I’m thinking about my goals and the company’s future,” meaning, “I want to better understand the value of the business, and how best to transfer it to my partners or family.”
- “My kids don’t want the business,” meaning, “I’d consider a sale of the business outside the family”
- “My kids aren’t sure if they want the business, it may depend of what it’s worth and how to pay for it,” meaning, “I’d like to sell my shares to the kids at a fair price but only if there’s a way for the business to succeed without saddling it with unaffordable loan payments”
As succession planning morphs into M&A, many M&A concepts are applicable including the importance of “chemistry” among entrepreneurial partners or family members. Very simply, if honest and open communications are not already present, there is little chance that a succession plan would be implemented, or even developed.