Succession planning isn't just about money - Entrepreneur's Notebook - Column

Nation's Business, Nov, 1996 by Andy Bluestone

Most of us equate business succession planning with working out the financial details following the death of the owner. In fact through the use of various life-insurance techniques, I'm continually showing business-owner clients ways to do just that--to prepare for making a smooth and cost-effective transfer of their business to the next generation. It's what I do as president of Selective Benefits Group, my financial-services firm, in Cedar Knolls, N.J.

But if I've learned anything since joining my father's business at age 22 and then purchasing it from him at 28, in 1987, it is that succession planning doesn't end with an estate plan and life-insurance policies.

Protecting the financial aspects of any business is, in fact, just the beginning; real succession planning involves developing a strategy for transferring the trust, respect, and goodwill built by one generation to the next.

Although we actively planned the transfer of the business for three years, Dad started building bonds of trust between his clients and me--roughly one-third of our accounts at the time--as soon as I came on board.

In the years between my joining the firm and becoming its president, I'd go along each time Dad met with a client. With each passing year, I started handling more of his accounts. By the time he retired, I had taken over most of his clients.

Still, being my father's son was not going to be enough for me to retain the trust of those longtime customers; they had signed up with my father's firm, not mine.

I started applying the "power of doing the unnecessary," sending his clients notes, stopping by, and calling--not to sell anything, just to keep in touch.

If I read an article that I thought would interest them or that was related to a policy they held, I would send them a copy

The point was to let them know they were on my mind and that, although it was Dad's business, I was going to serve them in my own way This approach helped solidify my clients' trust and confidence in me.

Similarly, the succession plan recognized that I needed to develop relationships with our employees. Early on, I took over both training and sales because I felt that with the sales force behind me and with "my team" in place, I could weather any storm. As with our clients, my expanding role meant paying attention to the details, in this case whether the staff was happy and had the support, technology, and other necessities to maximize their productivity.

Fostering both client and employee confidence and trust also meant letting people know the exact date that Dad would retire, a year in advance.

When the big day came, Dad actually left the office--an important step because it forced people to deal with me.

While no one likes firing people I wasn't afraid to move out individuals who didn't want to be part of my team.

I also held to my plan of minimal growth the first couple of years after the transition. Choosing not to expand our client base or staff right away not only eliminated unneeded pressure but also gave people time to feel comfortable with the change in ownership.

Years of planning paid off with a smooth succession, eliminating most of the bumps on a path that many small firms eventually must take. I bought the business over the first 48 months after my father left, giving him the liquidity he needed for his retirement years.

The company has grown from eight full-time agents in 1987 to 36 today. We earned $3.5 million in commissions in 1995, and we have increased our client base to nearly 8,000 people. Perhaps the best testament to our success is that we continue to attract quality salespeople. My father, at age 69, became our "newest" associate last year, rejoining the firm as a salesman after he found he missed being in the business world.

Andy Bluestone, president of Selective Benefits Group, in Cedar Knolls, N.J., prepared this account with Contributing Editor Susan Biddle Jaffe. Readers with insights on starting or running a business are invited to contribute to this column. Write to: Entrepreneur's Notebook, Nation's Business, 1615 H Street, N.W., Washington, D.C. 20062-2000.