Succession Planning For Your Suppliers, Contractors And Manufacturers’ Reps

Senior couple standing on boardwalk on the beach

Retired couple on the beach. GETTY

Small business owners are retiring in greater numbers as the Baby Boom generation ages. We wish them a happy retirement, but small and medium businesses use other small businesses for vital goods and services. Many companies have made succession plans for their owners and top managers, but what about critical non-employees? For example, a manufacturer may use independent sales representatives. A timber company may use contract loggers. A health clinic may outsource its human resources function to a small, local firm. And businesses across all industries use accountants, lawyers, and IT consultants.

Let’s call all of these other companies partner businesses, though they are not partners in a co-ownership sense. Some partners will be easy to replace, others more difficult. Smooth transitions require some forethought. The “silver tsunami” of retirements will certainly bring challenges for continuing businesses, but may also bring opportunities for greater sales and reduced costs.

The number of 65-year-olds is hugely larger now than a decade ago, 3.8 million versus 2.7 million. Age 65 is not a magic number, as some retire earlier and some later. The aging of small business owners is a fact, though, and they will eventually leave their businesses. Demographic data indicate that the rapid departures will continue through 2030.

Large companies that provide goods or services to small businesses are usually less of a problem, as they have layers of management. Executives at a large corporation that provides telephone service, for example, will ensure that retirement of a local manager does not disrupt operations. Some medium-sized companies also have good internal succession plans in place. Those plans may involve the next generation of family ownership or an experienced 50-year-old ready to step into the retiring owner’s shoes.

Small businesses present greater succession challenges. In many cases, the owner’s children are not interested in the business. In some cases, the next generation may not be competent. Companies without a competent next generation to take over would benefit from good managers who can run the business, but many small companies lack the management ranks to have a good reserve of talent.

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