How Construction Business Owners Can Simplify Succession Planning

Creating a comprehensive and actionable succession plan is often a daunting task for business owners. This is especially true for contractors, who may struggle to step away from the daily grind of construction to envision a future without their hardhat.

If this resonates with you, be assured that there are ways to approach succession planning in a gradual, organized manner that can make the process easier and possibly even strengthen the plan you create.

Lay the Foundation

One of the best ways to start building your succession plan is to assess “what you’ve got.” You know you own a construction business, but do you understand its value and the principal factors that contribute to that value?

To gain this understanding, consider engaging a qualified valuation expert with experience in the construction industry. Even if retirement is years or decades away, a valuation can offer intriguing insights about your company that may inspire strategic decisions.

Additionally, clearly outline your projected retirement date and goals. Do you plan to retire fully or transition into part-time work? Some business owners step down while retaining a role on the board of directors. Remember, you can choose your own path.

Make sure to involve all stakeholders in your succession planning discussions. This includes your spouse, family members (especially those involved in the business), fellow business owners, and your leadership team. Encourage input, and be open to their suggestions.

You'll also need to select a suitable method for transferring ownership, such as a sale, stock gift, buy-sell agreement, or trust. It’s wise to consider how your succession plan will support your retirement and provide for your family or heirs.

Evaluate Your Business Plan

Another essential step is to review and revise your business plan to account for ownership succession. A business plan serves as a baseline for monitoring progress and keeping the company on track. The goals outlined in the plan should act as performance benchmarks, and regular reviews can help assess whether the business is achieving these objectives.

Your plan should delineate the responsibilities of each executive and manager. The success of your construction company’s succession depends on your leadership team’s ability to understand and fulfill the financial and marketing goals specified in the business plan.

Establish a program to identify potential successors—whether they are family members, employees, or third parties—who are willing and able to take over. Foster their growth and facilitate knowledge transfer through training, such as industry certification courses, leadership workshops, business management classes, and hands-on mentoring or job shadowing.

Form an Outside Team

One of the simplest ways to ease succession planning is to assemble a team of qualified, objective advisors to guide you through the process. Your advisory team should include a CPA, attorney, and valuation expert. Many contractors also benefit from consulting with business advisors, brokers, insurance experts, and estate planning professionals.

These experts can help you refine the details of your succession plan. When the time comes for you to step down, they can assist with the execution process to minimize financial risks and tax implications, such as activating a buy-sell agreement with other owners.

Dream It, Build It

It’s important to recognize that succession plans are not just for those actively nearing retirement. Other business ventures, life changes, or opportunities may prompt you to step down from the leadership of your construction company. A solid succession plan, developed well in advance, can help maintain the legacy of the business you've dedicated so much effort to building. Our firm is ready to assist you in getting started or enhancing your existing succession plan.