Business Issues in Succession Planning

Floral Finance®

If you plan to pass your business along to your children, you naturally want it to be a well-established, successful company. Although you can never ensure future success, you can increase the odds.

However, you can't do that by ignoring problems and issues. As you prepare for the transition, you must look at the various challenges the business faces.

Your Operations

Successful businesses have sound operating procedures and encourage high levels of productivity.

The three primary issues you must have under control before your children step in are facilities expenses, Cost of Goods Sold (COGS) for arrangements and payroll expenses.

Do your facilities match your business needs? If you have too much space, your facilities expenses will likely be too high as well. Are your facilities expenses greater than 10 percent of sales? If so, you may need to make some facility adjustments.

Do you have a design room control system to make sure your designers are following your pricing formulas? Having COGS for arrangements at or below the target level (about 30 percent of arrangement sales) is the second most critical factor in profitability.

Productivity is another important profitability issue in a flower shop. Low productivity means your payroll expenses will be too high.

Competition

When was the last time you assessed your competition — not just the other retail florists in your area, but all the other floral competitors, such as supermarkets, bucket shops and large discount chain operations?

What are the strengths and weaknesses of each competitor? Are you competing effectively, or are you losing your customers? Is there anything you need to change in order to maintain or gain market share? What, if anything, distinguishes your shop?

By keeping an eye on the competition, you can see threats before they adversely impact your business.

In addition, look beyond your local community for any national trends. The goal is to prepare your business for success under the new, younger leadership. Position the next generation for success — not failure.

Technology

What technology are you currently using in your shop? What are your competitors using?

Technology boils down to communications and computerization. Have you computerized your shop operations? How old is your equipment?

Generally speaking, the younger generation is more knowledgeable about computers. You might want to involve your children in planning how your business is going to use the latest technology.

Communications technology impacts both operations and marketing. Do you have cost-effective communications with your drivers to increase efficiency?

On the marketing front, an increasing amount of business is conducted over the Internet. Tomorrow's consumers will expect most retail florists to offer their products online. What are your plans in this area?

A Business Plan

When was the last time you created a formal, written business plan?

If you are looking to pass your business on in the near future, now would be an excellent time to go through the process again. And when you do, involve your children in the various steps.

As you work closely together, you will have numerous opportunities to share your vision of the future. Your children will learn a great deal about your business in a very short period of time. It's a wonderful learning experience.

This process will also let you see how your chosen successors will grapple with the issues you face on a daily basis. By the time you complete the plan, you will have a much better idea of their strengths and weaknesses, and what training they need to increase the potential for future success.

Your successors, in turn, will have a better feel for the challenges and opportunities that lie ahead.

It's never too early to begin discussing the future of your business with your successors. By working together on a business plan, you can share ideas and plans, which will help you move toward a successful transition.