MSPs: Got An Executive Succession Plan?

MSPs: Got An Executive Succession Plan?

msp-succession-planConsider the following scenario: A manager service provider's CEO gets run over by a bus and leaves our world. Now, who runs the company? Who owns the company? My key point: Does your MSP business have a succession plan in place? Here are some key considerations, including thoughts from Heartland Technology Solutions CEO Arlin Sorensen.

I began to think about this blog entry based on a few pieces of info:

  • Recent Promotions: Heartland Technology Solutions has promoted Connie Arentson into the president position. Arlin Sorensen continues to serve as chairman and CEO. So, I wondered: Is there a long-term succession plan where Arentson potentially replaces Sorensen?
  • Co-owner Situations: Many MSPs and industry educators have co-owners. An example is The Network Depot LLC, which was formed from two S-Corps.
  • My Own Experience: MSPmentor's parent, Nine Lives Media Inc., has co-owners -- myself and Amy Katz.
Now, think of the worst-case scenarios: What if someone dies, gets sick, wants to leave or doesn't pull their weight? What if someone simply wants to retire? What if the company receives a takeover offer, but co-owners can't agree on a decision?

This is more than an executive leadership discussion. It's an ownership and "future of the business" discussion that potentially impacts all of your employees and customers.

So how are MSPs and industry educators handling succession planning? I gathered some thoughts from Heartland Technology Solutions (HTS), The Network Depot and MSP University. Today, we take a look at HTS. And in a second blog post, I offer succession planning thoughts from The Network Depot and MSP University.

Heartland: A Work In Progress

Heartland Technology Solutions is in the process of defining a succession plan, according to Sorensen.

"Step one was transferring some of the responsibility to Connie, who has been with me for 14 years and has been doing much of the role of President anyway," says Sorensen. "Our announcement formalized the reality of how HTS has been functioning. She has a strong management team surrounding her that helps make it happen every day."

Sorensen adds:
"Overall our industry is not very good about succession planning. Most don't have any plan, and many have never thought about it."

HTG Peer Groups

Meanwhile, HTG peer groups -- which include dozens of MSPs and VARs -- is forcing the issue by requiring a couple of plans as part of the peer group program, adds Sorensen.

The peer group organization has always required a business plan, and a leadership plan (which defines how the owner will participate in achieving the business plan -- a.k.a. accountability), Sorensen says.

More recently, the peer groups have required a life plan (to answer the question of "why I get up each day and what really matters") and now a legacy plan to address the question of what happens after the owner is gone, according to Sorensen.

That includes a lot of areas, he notes:
  • succession planning
  • disaster recovery planning
  • business continuity planning
  • collection of important information
  • recording of last wishes etc
"We focus on legacy for the business, but also for the person's life," says Sorensen. "What do you want to be the result of your company and life? But the reality is that a lot of us don't want to address the reality that our business will transition, we will die, and the world will go on somehow. It is much better to plan now to make sure there are no regrets or issues when those realities actually occur."

Among the variables succession plans need to address, Sorensen says:
  • sell to open market
  • merge with another org
  • sell to employees or select group of investors
  • create an ESOP (Employee Stock Ownership Plan)
  • transition to family (kids)
Concludes Sorensen: "For now, we are in great hands with Connie and Scott [Scrogin, President of HTG] at the helm of HTS and HTG surrounded by great management teams for both orgs. That leaves me the time to focus on important things for the future."

Readers: Feel free to weigh in with perspectives. And check out part II of this blog post -- featuring succession plan views from The Network Depot and MSP University.

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TAGS: Financing
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