Construction Today 2018 - Volume 16, Issue 3 - 11
limited, unless management or family members have deep pockets,
exiting the business can be challenging. Unfortunately, ownership
transition is not a one-size-fits-all scenario. For some, Employee
Stock Ownership Programs (ESOPs) present a viable solution, but
they do not work for all situations. A variety of partnership models
have been utilized as a means of transferring both leadership and
ownership over time to a newly created entity. Partnership models
allow for customization of a plan to fit all parties involved in the sale
or transfer of the business. Any solution takes years to put in place
and only works optimally when a firm has steady earnings because
in all cases, it is future earnings that drive the transaction. This
means that having a strategic plan in place to keep the company
growing is vital.
Too often, owners think that they will sell their firm to management but don't examine the cold, hard financial implications of that.
Transition requires an honest assessment of the company's value
and its future prospects. Owners cannot fool themselves about the
value of the company and then expect others to put money behind
A good succession plan has a lot of moving parts and takes considerable time and attention to detail. For contractors wondering when
is the best time to start, the answer is always "now."
Shane Brown led the
practice at EKS&H for
more than 10 years and
has served construction
companies for 20 years.
John Beeble is
president of Beeble
Company, a consultancy
he founded after a 35year executive career in
good succession plan takes
time and attention
to detail to succeed.
VOLUME 16, ISSUE 3 CONSTRUCTION-TODAY.COM
Mentorship: Identifying the next leader
or leaders with the right skills and temperament is an essential first step. Those persons
may be inside the firm, but if no insider fits
the bill, owners should be willing to recruit
from another firm. Once possible successors
are identified, the current leader should
actively provide mentoring - a mix of formal
leadership training, skills enhancement and
executive coaching. Becoming a leader is not
something that happens by flipping a switch.
An individual's growth requires adding
responsibilities gradually using specific,
measurable, attainable, realistic, and time
sensitive career targets. That includes targets
for adding new clients - vital in determining
the successful continuation of a company
after the leader of a general contracting
business steps aside.
Organization: General contractors are
often led by a superhero - a leader that does
everything. Firms are often started by a technical, hands-on specialist such as a carpenter,
electrician or plumber and lack professional
management processes and procedures. Any
succession plan starts by transitioning from
a model where one or two people run every
aspect of the firm to one where managers
are appointed in key roles throughout the
organization and are given real authority.
Succession requires creating a deep, scalable
bench that can grow the company and develop relationships with outside firms.
Strategy: The No. 1 goal after any transition is to ensure that new contracts continue
coming in after the old boss is gone. That
means putting in place a strategic plan for
growth that is regularly updated. That can
involve such things as diversifying the firm's
sources of revenue, expanding into adjacencies, adding service revenues to offset
economic cycles and a plan for investing in
capital equipment. Having a variety of rainmakers on staff will also help growth plans.
That's especially important because future
earnings are what will finance the debt needed for the transition.
Finances: With capital market options