The ability to continue operating at the expected level during a change in leadership can be make or break for any business. Family-owned businesses, like many equipment rental organizations, must make arrangements for the continuity of business practices in preparation for a change in leadership.
The ARA recently spoke with Resnick Succession Planning on this topic and they stressed the importance of having a plan in place even if you don’t have imminent intentions of exiting the business.
“Be proactive in your business succession and estate planning. Regardless if you’re planning to sell, a plan should always be in place in the event something unforeseen happens,” Lee and Terry Resnick advised.
According to the Resnicks, the biggest mistakes they see equipment rental companies make in succession planning are, “procrastination, not knowing a realistic value of their business, and not maintaining a current and comprehensive plan.” Unfortunately, these mistakes can lead rental business leaders to pay more in taxes that could have been legally avoided with proper planning, not transition businesses in a seamless manner, and the greatest blow of all, lose the business with corresponding fallout among family members.
Statistics show that less than half of family-owned businesses are able to successfully “pass the torch” to the next generation, leading to many lost businesses. By choosing the right ERP Platform, such as Rental360 powered by Acumatica, rental companies can give themselves the best chance of making the jump to the next generation.
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Equipment rental companies have several industry-specific concerns when it comes to business succession matters. Forward-thinking rental companies will properly valuate their business and equipment prior to transitioning leadership. Incoming executives will have enough
challenges without having to hire key employees and may struggle with untimely financial burdens to replace broken equipment. When planning a change in ownership, aim for your least busy time of year. You can also set up your successor for success by introducing them to strategic suppliers and large customer accounts as well as cleaning up your data and automating your business practices.
Rental360 can offers enhanced automation capabilities that will ensure a smooth transition.
Looking internally every succession plan has multiple parts – preparation, evaluation, transition, and exit.
Preparation
Preparation is primarily focused on ensuring the affected parties- employees, vendors, and clients- are all ready for the upcoming change. In addition to the considerations outlined above, rental companies should take special care to ensuring that every employee’s role in the transition is clearly defined. This stage is vital to an effective transition- as the old adage goes “fail to prepare, prepare to fail”.
Evaluation
Evaluation is concerned with finding the best possible successor for the business. Family-owned companies may or may not face a “succession crisis” where there are multiple candidates to take the helm. Other times the next generation may not be prepared, skill or knowledge wise, to step into the role. Rental360’s user-friendly interface is helpful for orienting and educating users on all aspects of the business, offering insight to areas into which a potential successor may need to familiarize themselves.
Transition
The transition phase is the hard part – handing over the keys to the kingdom to the next generation by arming them with the tools and knowledge they need to successfully run the business. Experts advise a side-by-side co-working experience for at least six months, which allows the successor to slowly take on more responsibilities as they become more comfortable with systems and processes. Gauging feedback from employees, vendors, and customers is critical at this juncture.
Exit
The final aspect of a successful succession plan is the exit. While many executives choose to maintain a small, even informal role within the company’s hierarchy, it is important to not overstep and undermine employees confidence in the new leadership. This is especially important in small, family-owned businesses, as family dynamics are in play and are often known to employees, vendors, and clients alike.
Choosing the right ERP platform can give equipment rental businesses a leg up in the succession planning process. Rental360 is the ideal choice for family-owned rental business as it provides industry specific tools tailored to meet the needs of small to mid-sized business.