Without adequate preparation, some manufacturing and distribution companies will be vulnerable during a leadership or ownership transition.
Just 19 percent of manufacturing and distribution leaders say they are “very prepared” to face the challenge of an ownership or leadership change, leaving many of their businesses vulnerable during a difficult transition period.
Manufacturing and Distribution Outlook: Planning for 2015
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That’s just one of the insights in CliftonLarsonAllen’s annual industry survey. It goes on to reveal that, even though 45 percent of respondents anticipate a leadership transition in the next one to five years, 77 percent are either “somewhat prepared” or “somewhat unprepared.”
“While it is critical for companies to manage financial events and indicators, it is just as important to understand the nonfinancial events that can have an impact on the business,” says Paul Bailey, principal in manufacturing and distribution with CLA. “We are about to experience one of the largest wealth transfers in U.S. history, but it looks like many business owners in the industry aren’t fully prepared.”
An estimated 9 million of America’s 15 million business owners were born on or before 1964; an estimated $11 trillion of their wealth will soon be transferred from one generation to the next.
“This will provide plenty of opportunity for businesses to grow through acquisition, or for the next generation owner to re-energize his or her organization and prepare it for the future,” Bailey says.
Fifty percent of survey respondents said they anticipate that a leadership and ownership change will occur at the same time. Bailey calls this “one of the riskiest times for a business.”
He recommends planning ahead to ensure that the most qualified and experienced individuals take the reins of these companies and keep them profitable and growing. The process can be extremely emotional and may seem overwhelming, but it can be simplified and made much less stressful by creating strategies that offer flexibility rather than predicting an outcome.
How we can help
Our proprietary asset/liability planning tool can help business owners understand the impact of ownership changes and how a sale can affect lives and financial well-being. CLA is a professional services firm focused extensively on privately held companies and their owners. We can help the owner of any size or type of business crystalize goals, create value, prepare for the transition, and preserve a legacy.
Learn more about trends in leadership transition planning in Manufacturing and Distribution Outlook: Planning for 2015.