Include Sustainability in Succession Planning

Due to the size and success of the Baby Boomer generation, most existing private companies are currently led by a person nearing retirement age. Studies say more than 70 percent of all privately held company owners are planning to retire in the next ten years.

It will be a buyer’s market, which presents a number of problems. Achieving an acceptable disposition valuation/price will be challenging, given the quantity of buyer options. Finding ways to differentiate on the brand side and reduce perceived risk on the operational side will be even more important, given the expanded competitive marketplace.

With business sale due diligence becoming standardized, more questions are being asked, requiring more seller prep prior to offering the company for sale. With more prep required, lead time is longer and staff participation greater, making secrecy harder.

Add the fact that many privately held companies are family owned, resulting in even more complexities. Unless there has been a solid management approach for the environment, an intergenerational sale may carry risks and liabilities for the new owners.

Finally, maintaining/growing revenues, margins and EBITDA, until the day of disposition, is a daily struggle.

SOLUTION

A solution to the problems listed above that is always considered by publicly traded companies, but seldom considered by privately held companies, is sustainability. Becoming a certified sustainability company, with an operational environmental management system (EMS), is a way to prepare for future disposition, but the goal is long-term and positively viewed by staff. It also typically brings many benefits to an organization, including the following.

Improved EBITDA;
Improved net income and overall financial performance;
Enhanced product/operational performance;
Reduced costs;
Increased valuation;
Reduced disposition surprises and delays;
Improved competitive advantage;
Improved management commitment, employee engagement, and hiring and staff retain-age;
Improved public image;
Improved legal and regulation compliance;
Improved emergency preparedness;
Reduced risk;
Reduced permit violations; and
Increased new market penetration and market influence.

The premier sustainability standard is the ISO 14001:2015. Hundreds of thousands of companies have used it in more than 150 countries. However, ISO 14001:2015, in its regular form, is document-heavy and designed with large companies and staffs in mind.

The goal for a privately held company is to find an organization that has created and can deliver a Small to Medium Enterprise (SME) version of ISO 14001:2015. This does exist. An SME version of ISO 14001:2015 has been created and it is scalable and cost-appropriate for SMEs.

Part and parcel with finding a company that can deliver an SME version of ISO 14001:2015 is also finding a company that will help the client effectively promote the certification to its audiences. For example, if a contractor does something good, such as becoming a certified sustainable business, and doesn’t talk about it, nobody knows. But, if the contractor properly promotes the certification, the market rewards it with the benefits mentioned above.

Originally featured on Construction Executive