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- Published: Thursday, 14 August 2014 15:26
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Business Succession Needs a Plan
Staten Island commercial bank urges owners to focus on keeping it going
STATEN ISLAND, N.Y. – One of a business owner's most important challenges is continuity.
Whether a key person retires or passes or becomes incapacitated, Victory State Bank urges owners to have a succession plan for their enterprise to stay in business.
Studies have shown that the overwhelming reason that businesses fail in the next generations is the lack of a succession plan.
In a family business, sometimes a parent-child relationship also needs to be addressed, if not healed. When there are several siblings, their respective interest in being part of the business also can be an issue.
The matter of succession is especially germane for a family business that has lasted through a couple of generations but where the next heir apparent has strong opinions at odds with its existing nominal head. Think of a son or daughter wanting to manage the enterprise in a different way, and disagreements ensuing with the father.
A succession plan usually is carefully nurtured in the way it gradually unfolds. Victory Bank stresses that owners should begin a plan now and not procrastinates.
Roles can be tried or modified as individual strengths or weaknesses emerge without losing sight of the main objectives.
And in the context of succession, certain kinds of insurance may be suitable once a plan's components become implemented.
One example is key-person insurance, a life-insurance product -- typically term insurance in force during the interval of an individual's anticipated length of service. This kind of policy reimburses the business for the loss or incapacity of whoever is considered uniquely valuable. These funds can then be used for interim expenses according to the plan of succession.
Succession planning likely is unfamiliar territory for many business owners, who may not even be aware that some guidelines and general principles exist.
The federal Social Security Administration (SSA), in fact, has a free course posted online at www.ssa.gov/section218training/basic_course_8.htm.
"Management succession planning in the family company," SSA says, "requires focus on the four key departments present in any business of any size: administration and finance, operations and customer fulfillment, sales, and marketing."
The course then goes on to look at ownership succession planning, leadership development, and a host of questions such as "How do I start?"
By necessity, some of SSA's precepts are rather general so that they can be adapted for individual situations.
It is also rather practical, however: "Keep [the plan] plain and simple. Succession planning is more a mindset than a set of instructions. Therefore, don't overcomplicate the process by inundating it with steps and procedures."
About Victory State Bank
VSB Bancorp, Inc. (OTCQB: VSBN) is the one-bank holding company for Victory State Bank. As Staten Island, N.Y.’s only community-based commercial bank, Victory State Bank operates five full-service locations on the Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online http://www.victorystatebank.com.