Small Business Succession Planning: Another Cautionary Tale
If the CEO of a managed services provider dies, what happens to the company and its customers? That question continues to pop up in the managed services market where two untimely deaths offer tragic reminders about succession planning.
One story involves Michael Kenwood, founder of Kenwood Technical Consulting in Princeton, N.J. Kenwood, also an emergency responder, died during Hurricane Irene in August 2011. But his tragic story has grown louder across the web in recent weeks, through the work of NYSBS and GFI Software.
Kenwood belonged to NYSBS, an organization that represents nearly 300 IT business owners in the New York Metro area. When Kenwood died, other NYSBS members scrambled to service Kenwood Technical Consulting’s customers on Kenwood’s behalf. But there were some challenges since Kenwood had not documented many of his business processes.
“You can’t walk around with the business in your head,” notes Michael Klein, an executive member of the NYSBS community, in a podcast posted by GFI Software. To help keep a business going amid an executive tragedy, Klein’s podcast tells peer MSPs to document:
- Client names, contacts, phone numbers, user IDs, passwords, and so on.
- Rates and invoicing processes.
- Employees, subcontractors, and key partner information.
- RMM tools in use. In Kenwood’s case, he was running GFI Max.
- Long term, who can you sell your business to? Which brokers can help?
- Make sure your spouse or business partner knows where to find all the information.
I realize this is a human tragedy — and I don’t want to position technology as a miracle solution. But in Kenwood’s case, RMM software played a key role in keeping his business going. GFI Software agreed to waive monthly fees on Kenwood’s account until the NYSBS community could get a really good feel for what Kenwood was managing, his client base, and so on.
Now, Kenwood’s peers and GFI are striving to raise money for Kenwood’s family; he left behind a wife and two-year-old daughter.
Network Technology Solutions
Unfortunately, Kenwood’s story isn’t unique. In October, Scott Mallet, president of Network Technology Solutions, died of an apparent heart attack. Mallet was only 36. HTG Peer Groups, of which Mallet was a member, offered emergency support to NTS. Among the associated business challenges: Making sure NTS’s bank accounts — and therefore payroll, vendor payments, etc. — continued to operate following Mallet’s death.
Small businesses have always struggled with succession planning and executive contingency plans. Heck, even massive companies like Hewlett-Packard have stumbled badly with CEO succession planning.
MSP-centric organizations like HTG Peer Groups and NYSBS have certainly seen the challenges first-hand, and can likely offer peer MSPs some timely guidance on a difficult subject.
I am a 30-year VAR/MSP and a Certified Business Continuity Professional through the Disaster Recovery Institute. These tragic situations were predictable (although not expected)and plans could have been made to allow the businesses to continue. With owners the situations may be complicated because the business financing is tied to their personal assets. In partnerships, Buy-Sell agreements funded by life insurance can avoid the surviving spouse becoming an unwanted or incapable business partner. When planning for an untimely death you should also consider key employees – senior engineers and account managers– whose untimely illness, injury, or death could have a devastating effect on the business. Insurance on owners and key employees may lessen the risk for the business. Documented plans and processes will help others pick up the pieces. Remember that Hope Is Not A Business Continuity Strategy. Owners owe it to their families; loyal employees amp; customers; and to their community. They should work through the challenges while they are thinking clearly, not in the midst of a disaster or tragedy. My sympathies to the Kenwood and Mallet families.
Mike,
Thanks for those additional pieces of advice. They certainly hit home for me.
Before Nine Lives (MSPmentor’s parent) was acquired, my business partner (Amy Katz) and I had owners insurance. So at least our spouses and the core business were protected if anything had happened to me or Amy.
But I concede: I overlooked a ton of “business” matters while we were an independent company. Amy was so good at running the company that I never really asked “how” certain business processes worked. Shame on me. Fortunately we didn’t have any setbacks. When we got acquired in Aug. 2011, we gained a safety net — parent Penton Media, which has a range of business processes in place.
-jp
Check out my new startup Isogra, the web’s most advanced business for sale marketplace at http://www.isogora.com.
Stacy: I was going to remove your comment from the MSPmentor website because it’s clearly automated marketing spam. But then I reconsidered and decided to leave it up.
Amid a conversation about the untimely death of an MSP, and the tragic impact on the executive’s business and family, Isogora has posted an automated spam comment.
Your marketing department should be ashamed.
-jp
Well said Joe. Thank you