Starting succession planning early ensures an easy transition for a business and its customers

Stephenie Bjorkman wore cowboy boots, jeans, and a cowboy hat to her first day at work at Sami Fine Jewelry. She was 17 years old and had no intention of staying in the business, but her mother, Sami Jack, had some health issues and Bjorkman came to help out.

As it happens, the insouciant teen eventually grew up to become the owner of the thriving Fountain Hills, Ariz., store after she and her mother put together a succession plan to ensure the best outcome for both generations as well as the business.

“A succession plan makes the transition of the business easier,” says ­Bjorkman. “It took many years for my customers to trust me, but now that my mom is no longer here, they were not surprised or concerned about the quality of our product and the experience that we give our patrons.”

Stephenie Bjorkman was a fixture at Sami Fine Jewelry in Fountain Hills, Ariz., even as a 3-year-old. Little did she know that, eventually, she’d take over the business from her mother, Sami Jack.

Despite the blood ties and a good relationship, it wasn’t easy, Bjorkman says, so they sought some help. “You have to make sure you have someone that both parties trust to be a middle person, since you want to make sure all the paperwork and details are correct,” she says, adding that they hired their accountant for this role. 

Jack and Bjorkman started talking about succession seven years ago and began writing a formal plan a year ago. The process involved a lot of legal wrangling and therefore took much longer than anticipated.

The banks presented the most challenging obstacle to the process, Bjorkman says, because things kept changing, such as the terms of the deal, the type of loans on the store’s building, and how the mother-daughter team wanted to configure the business deal for tax purposes. 

“It’s never too early to start thinking about succession planning,” says Caroline Worley, founder of Worley Law LLC in Westerville, Ohio. “What is often overlooked is the need for a process to navigate the emotional minefield so hard feelings are minimized and the business thrives.”

She suggests talking to any other family members or employees who are involved to prepare them for the avalanche of paperwork and legalese that’s soon to come. “Then they can start doing their own research on why this is necessary and start understanding why it is important,” she explains.
So why exactly is it important?

“Having a succession plan increases your chance of being able to cash in on your business, allowing the owner to walk away with some money in their hand,” says Worley. “And they can feel good about the continuation of the business, especially if it’s profitable.”

Bill Sustachek with his son-in-law, Joel Hassler, the proud new owner of Rasmussen Diamonds

Joel Hassler’s in-laws, Bill and Kathy Sustachek, decided to sell their business, Rasmussen Diamonds in Racine, Wis., to him in 2011, after they’d both suffered major health scares. The two continue to work in the store and are both on payroll. “They weren’t ready to retire but didn’t want the ownership headaches,” Hassler explains.

They also needed to plan carefully because the money from the business would provide the nest egg for their retirement years. “It is set up as deferred compensation over 10 years,” Hassler says.

But succession planning isn’t essential for only business owners. For the person gaining the business, “it’s about predictability, stability, and acceptance,” Worley says. “If they know that there is a plan in place, the transition is easier for them to accept and understand. It also gives a sense of security for the future.”

Hassler paid attention to what he’d be gaining, ensuring that he wasn’t overpaying for the business, for example. A carefully considered plan of succession also gave him the opportunity to divest most inventory and debt. “It gave me the flexibility to bring back the brands and product that I wanted to carry,” Hassler says, “and it gave me a good spot to draw a new line in the sand with vendors, customers, etcetera.”

The process took Hassler and his in-laws roughly 18 months to complete, but it was particularly essential because Hassler was a non–blood ­relative buying a business that none of his in-laws’ five children wanted, despite the fact that two of them work in the store.

Cal Sustachek with his son, Bill, in 1988 when they bought Rasmussen Diamonds in Racine, Wis.

There were a lot of awkward conversations, he says: “We had to think about the worst. You don’t want to talk about death and divorce, but we had to do it and we were going to make it work.”

Business succession when there are no family members involved can be easier on the emotional side, but usually not in any other way. In fact, when John Wohlwend decided he would pass his ­business, Jack Lewis Jewelers in Bloomington, Ill., on to his employee, John Carter, he started with a 10-year timeline.

“If you don’t plan it out, it won’t happen—at least not the way you want it to. It really is that simple,” says Carter. “The succession plan keeps you on track.”

The timeline the two prepared mostly dealt with the gradual transfer of responsibilities, not only to prepare Carter for the transition, “but also so there was as little interruption to the way we conducted business as possible,” he explains. “This was the best course of action because when the time came, I could just grab the reins and take control.”

The succession plan allowed everything to fall into place, says Carter. It enabled him to finish his gemological studies and to work side by side with Wohlwend.

Without the timeline, “I would not have had a firm grasp of the financial side of our business,” Carter says. “I am a salesman at heart. The financials did not come as easy. Having John around and surrounding myself with colleagues who grasp that part of the business firmly really helped me to grow and become more of a complete business owner.”