Jon Bauer, Attorney
Hawley Troxell
Guest Author
Jon Bauer, Attorney
Hawley Troxell
Most business owners aren’t just in it for the money. Some love their industry. Many find satisfaction in providing jobs or simply helping their clients. Other’s feel their business provides a valuable service or benefit for society as a whole. Regardless, most can identify a value beyond the income it provides them personally.
If this is true, then there is value in a business owner planning for business succession. Frankly, even if personal wealth is the only thing important to an owner, planning for succession will likely maximize an owner’s return on their personal investment of time and capital. In an environment where most closely held businesses fail after the first generation, well planned transitions and trained successors increase the likelihood of a business’s long term survival.
Of course, successors are selected and trained in many ways, but they all start as business novices and require experience and guidance to become seasoned operators. Fishing is the same way. There is much to learn between the first little sunfish on a worm and the giant marlin on a fly. It takes time and there must be the right balance of success and failure, independence and guidance.
The Button Pressed Spin Rod
Those short little rods are great starter tools. Standing behind the little angler, you help them cast. You 
might even set the hook and do some reeling. However, by keeping the tackle and type of fishing simple, with a press of the button and a flick of the wrist the child has soon mastered this simple form of fishing. There will be tangles and maybe even a little blood. However, some fish will be caught and smiley photos will be shared with friends and family.
A good business mentor creates great learning experiences for a potential successor. Assigned tasks stretch the trainee’s skill-set without involving vital, complicated business decisions where failure could be catastrophic to the trainee and business. Staying close, the mentor provides guidance and feedback.
Reading the Water
As your angler starts to zip that line out it is important to teach them how locate fish and avoid snags. If they are in the wrong spot, they can cast all day long and not catch a fish. The bass are hiding in the structure, the trout along the seams. It takes experience to know the likely spots. Also, there may be fish hiding in the weeds, but the angler better know how to tie on a weed-guard or lots of tackle will be lost.
It takes years of experience to distinguish between good opportunities and bad options. Even with such experience, all good business owners make mistakes. As a successor learns the skills required to run a business, they must also learn where to put their own efforts and the business’s resources. Again, trial and error is part of the process, but a mentor’s guidance can minimize damage to the business and maximize the learning curve.
Skin in the Game
Your angler is hooking into some big ones and that little push button rod isn’t cutting it anymore. Fishing gear can be expensive. It needs to be cared for, maintained and stored properly when not in use. Otherwise, more money will be spent to repair and replace it. Make the little angler reach into the piggybank and help pay for the equipment. It will drive this point home. It also provides a litmus test to determine if the kid really wants to fish. Better to know now before spending a few hundred dollars on more equipment.
For various reasons many owners find ways to transfer ownership without making the successors actually pay for anything. Sometimes the shares are “earned” as a bonus on a yearly basis. Sometimes the owners carry-back a note. Sometimes, the ownership is literally given a way. Generally, these are all mistakes. Successors that put in their own cash (whether borrowed or drawn straight from their bank accounts) will be more focused and diligent with respect business decisions. Additionally, if a potential successor won’t make a few financial sacrifices for an ownership position, they likely aren’t ready to own a business.
This raises an important point. Business ownership, like fishing, isn’t for everyone. It takes some business owners many years and numerous false starts before the right successor, or successor group is found. Patience and persistence are important and it is vital to start succession planning early.
Solo Fishing
Casting, reeling, tying (and untangling) knots, releasing fish, understanding how the gear works…your angler has the basics down. The fish
in the local ponds and rivers are scared. Over the dinner table there are stories of the day’s adventures. The more experienced angler is still around for questions and input but largely hangs in the background acting as a sounding-board and an advisor.
The successor has the confidence and experience to make significant decisions on behalf of the business. They’ve been promoted to president or CEO. With board oversight and guidance they are running the business and making key decisions. The original owner is stepping back though still providing valuable input.
Running the Ship
The young angler fires up the boat and drives the mentor to newly discovered fishing spots. After deftly casting flies into tight spots, the young angler shares photos of 180 pound tarpon and giant king salmon caught on recent trips. These fish far outweigh anything that the mentor ever landed. Sitting in the front of the boat the mentor smiles and knows the job is done.
The business owner can, and should, retire. Even if it is to move on to another business venture. The successor has the skills needed to successfully run the business. Our retiring owner’s investment, or payments due to him for a final buy-out, are as secure as possible. Now, he’ll finally have time fish.
Jonathan R. Bauer is a business attorney with Hawley Troxell focusing on general business counseling, corporate formalities, real estate, estate planning, business formations, commercial transactions, and financing of capital assets, equipment, operating loans, lease financing and other forms of financing. He represents clients from startup and established business entities, corporate tenants, developers, land-lords, sellers and lenders. Jonathan may be reached at jbauer@hawleytroxell.com.
