Succession planning in the electrical contracting sector

Like most things within the electrical contracting sector, the demographic (age) spread of our workforce mirrors the demographic spread of the broader economy. In essence the demography of our sector is that we are:

• mainly comprised of SMEs and/or family owned businesses;
• dominated by baby boomers, many of whom are either retiring or about to retire; and
• are not renewing our workforce departure with the same number of entrants.

I recently attended the NECA Conference in Bali. The last session, I thought, was one of the best. It focussed on succession planning – not from a practitioners perspective but from four members who are currently going through the process. In other words, here were four contractors, who were either retired or retiring, providing their valuable insights to the delegates. It’s no exaggeration to say you could’ve heard a pin drop. After the collective years within the sector, what were their words of wisdom of our four Captains of Industry? 

• It’s never too early to plan. Don’t leave succession planning to the last minute. Yes we’re all busy, yes there are multiple priorities, yes the cricket is just about to start BUT in many respects succession planning is just like insurance – it’s a grudge purchase but we need to act.
• Flexibility and evolution. Like any plan, what is suitable today may not be suitable tomorrow or next year. Circumstances change and with changing circumstances your succession planning needs to be just as flexible.
• Find the right professional for the job. Given the complexity of your business, (whether it’s a SME or family owned), the specialisation that it may offer, the stage it’s at within its growth cycle and a myriad of other factors, you’ll probably be best served by the right professional (lawyer and/or accountant) guide you through the process. Many professionals, including lawyers and accountants, actually specialise in valuing businesses, succession planning, tax advice etc.
• Evaluate your own retirement needs. As part of the succession planning process, one of the questions you should be asking yourself is – do I have sufficient retirement savings? Again, professionals can help.
• What employee buy-in options are available? Depending on how this is approached, this can be a powerful incentivisation approach that can maintain and/or grow underlying value. One of the aims is surely to preserve and maximise shareholder value – again there is merit in discussing this strategy with professionals.
• Set a timeframe. If you have created a succession plan, you should consider setting a realistic timeline its implementation. If the timeline is too long or short, there can be transitional issues that may not be beneficial.

Back to the conference, one of the other messages that I received from our Captains of Industry was that this is inevitably a topic that many of us will seek to defer, either consciously or sub-consciously. However, once you’ve grappled with it, a weight is lifted.

Whilst I know that this isn’t core business for the majority of us, at some point in time it becomes core to our business. All the best.

Written by

Suresh Manickam