June 28, 2025
Black companies ought to make succession planning a precedence alongside boosting income and including clients.
Serving to to make sure enterprise longevity and making ready for a clean management transition are among the many causes house owners of Black small companies (SMBs) ought to contemplate succession planning.
Trimming the prospect of disrupting operations, creating wealth for the following era, and lessening the chance of closure are different elements why entrepreneurs ought to discover such a plan.
The necessity to act now as an alternative of later is excessive as a result of the dearth of succession planning can affect monetary safety for households, disrupt wealth switch, and stop asset accumulation. The truth is, some consultants recommend enterprise house owners set up a plan a number of years earlier than beginning the method.
Nonetheless, succession planning is commonly ignored by small enterprise house owners, together with Black entrepreneurs, observers say. With a enterprise typically being the biggest asset for a lot of proprietors, together with family-owned companies, it ought to get the identical precedence as growing income or boosting all buyer relationships to assist spur and maintain development.
Knowledge present over 65% of small enterprise house owners plan to retire within the subsequent two years. With out a set succession plan, a lot of these corporations round for many years might disappear sooner. The information additionally reveal that simply 30% of small companies efficiently promote, which means 70% don’t have a purchaser or an unsure future path.
An entrepreneur and writer, Karla Trotman succeeded her mother and father in 2020 because the proprietor of Electro Tender Inc. in Montgomeryville, Pennsylvania. She acquired the enterprise that labels itself the nation’s largest Black-owned electronics manufacturing and engineering agency.
Trotman, the agency’s president and CEO, supplied BLACK ENTERPRISE some suggestions for others considering enterprise succession.
She famous that research present that 70% of Black Individuals don’t have an property plan, not to mention a enterprise succession plan. “That signifies that we aren’t doing the naked minimal to deal with our private affairs upon dying.”
Brian Ford, wealth administration advisor with Northwestern Mutual, shared by electronic mail that when he talks with Black enterprise house owners, it’s clear that the enterprise typically represents greater than only a supply of revenue. It displays years of effort, private sacrifice, and pleasure in constructing one thing that issues.
“Succession planning provides you a method to defend every little thing you’ve constructed and ensure it continues to develop,” he says.
A life insurance coverage and monetary companies large, Northwestern Mutual provides wealth administration companies that embody steerage for enterprise house owners.
When a succession plan is in place, banks, shoppers, and suppliers acquire confidence within the stability of the enterprise, Ford says. It reveals the enterprise is well-run and targeted on the long run. That sort of planning helps higher entry to financing and smoother relationships with distributors.
Unable to discover a guide particularly on succession and one relatable to an organization of her sort and dimension, Trotman was prompted in 2024 to put in writing Darkish, Soiled, Harmful: Constructing the Vibrant Way forward for Manufacturing.
Her agency has 30 staff and a seven-figure annual income.
Trotman’s guide consists of “breadcrumbs to permit others to take the right steps to shut the wealth hole inside their households by means of such means as enterprise possession.” She says the guide reveals that not planning for wealth switch can price households excess of planning forward.
Trotman says she had top-of-the-line succession planning experiences {that a} next-generation proprietor might have by working straight along with her father for 11 years, together with operating the corporate for 3 of these years, which “supplied the proper on-ramp for me.”
She left a company profession to grow to be the successor. She was a brand new mom, and her legacy took on a brand new which means for her. “Now that I’m creating my succession plan, I have to contemplate numerous eventualities, considered one of which might give my two boys the identical runway of time that I had,” she says.
Along with her data restricted on the time, she sought recommendation from fellow enterprise house owners who launched her to non-public wealth administration. “They not solely handle your investments but additionally have a set of companies that help enterprise house owners,” she says. “It was a world I used to be unaware of.”
For enterprise house owners planning to move on the baton, Trotman says household dynamics get robust with dying, divorce, remarriage, and stepchildren, so make your needs recognized early. Have plans to save lots of the enterprise. For example, if the proprietor dies unexpectedly, does the household have enough funds to pay the taxes and navigate the expensive probate course of? Decide if the agency might be offered to a purchaser who doesn’t see it as an emergency sale and doesn’t supply full worth. Will the enterprise have to shut?
In case you have a number of kids, Trotman advises doing an evaluation to see who’s finest suited to run the corporate. “The incorrect individual can simply destroy the enterprise and its worth,” she says. Be aware that the proprietor could also be too deeply embedded within the firm’s processes. That reveals the corporate is overly reliant on the proprietor, and new processes have to be developed.”
Trotman’s backside line: “The household legacy will finish with out correct planning. The method isn’t intuitive, and the chance of failure is excessive.”
Ford pressured that legacy carries a deep which means for lots of the Black entrepreneurs he works with. “It’s about ensuring that the values behind the enterprise proceed to form the long run. A very good plan helps that imaginative and prescient in a transparent and sensible means.”
And since succession touches so many areas, he says working with the fitting advisors is essential.
“A monetary advisor might help deliver collectively the authorized, tax, and monetary items so the plan works when it’s wanted,” Ford provides. “That sort of help helps preserve the enterprise sturdy and prepares the following chief to succeed.”
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