The Longevity of a Business Depends on Succession Planning

BY JOSEPH AMATO

Proper planning will almost always ensure successful results. Lack of planning will result in unanticipated consequences that could have been easily avoided and may prove detrimental to the continued existence of the company. I am writing this article to provide specific insight and direction on preparing your business for the future.

There will always be multiple challenges in the lifecycle of a business operation. None is more evident than the lack of planning for the continued operations due to retirement, sickness, or death of the existing ownership. The goal is always to be ahead of the curve and minimize or eliminate unwanted surprises that can negatively impact the long-term health and well-being of the company.

In the last five years, I have witnessed this situation multiple times in Las Vegas, where companies owned and operated for an entire generation by a single owner or partnership were not prepared to pass the baton to a predestined individual or group.

Case in point: Cashman Photo began its first Las Vegas photography concession in 1967. Well before the days of digital cameras, the photography business involved wet labs, and every photo was almost magical to their customers.

Its founding partners, identical twin brothers Morgan and Harris Cashman, initially started their dream of business ownership in the late 1950s. At that time, they lived in Miami, Florida, taking pictures at the various resorts and earning a decent living. Years later, Morgan and Harris Cashman met Caesars Palace founder Jay Sarno who was fascinated by the amazing photos the young gentlemen had produced and invited them to launch their business operation in Las Vegas. The rest is history.

For the next 44 years, the two brothers grew Cashman Photo, a thriving multi-media enterprise controlling the photographic business in Las Vegas and other strategic locations.

The Cashman brothers were aware that the Company would eventually need to have a plan of survivorship should something happen to them. But they had no idea what succession planning was or how to implement such a plan.

In the early 2000s, Robert Dolan joined Cashman Photo and eventually became the company’s Vice President and Chief Development Officer. Mr. Dolan had an extensive background in the photographic industry and would begin to solidify the company’s operational structure complimentary to the Cashman brother’s vision for the future.

For the next decade, the Company flourished. Morgan Cashman and Robert Dolan developed a strong business relationship and became great friends. Unexpectedly, Harris Cashman passed away at the age of 75 in 2011, leaving Morgan as the sole owner of the company.

I entered the picture in 2018 to assist Cashman Photo in developing a strategic plan for the future growth of the Company. By 2019 the Company completed revamping its financial budget model, moving to zero-based budgeting in 2020 and cutting over 14% of its previous year’s operating expenses, mostly in the area of staff adjustments and renewed rents with the various resorts in Las Vegas.

But most importantly, in early 2019, Mr. Cashman, Mr. Dolan, and I worked on discussing the details of a succession plan, including Karen Cashman, the spouse of Mr. Cashman. That was a subject they had talked about for years prior. Unbeknownst to us at the time, Morgan Cashman passed away unexpectedly in August 2019 at 83 years old.

The implementation of the basic elements of a succession plan and the associated strategic planning was very timely with its changes to the business operation, especially given the unforeseen death of Morgan Cashman and the extended impact of the COVID crisis. The Company was positioned to withstand the death of its remaining founder and immediately downsize its entire operation, cutting expenses and staff to accommodate the reduction in workflow and revenue due to the effects of COVID on Las Vegas.

With Morgan’s passing, he left the Company in the very capable hands of his spouse, Karen Cashman, and Robert Dolan (CDO), who managed the Company’s day-to-day operations of 350 employees and three technology-driven divisions. As the Company began ramping up operations with the Las Vegas resorts reopening, it saw much higher revenue than anticipated while maintaining actual expenses within reasonable budgetary limits. The Company began to realize full operational capacity by the beginning of 2021.

Not very long after settling in, I was approached by Karen Cashman about the future of the Company and her intention to transfer the ownership of Cashman Photo to Robert Dolan as Morgan Cashman originally intended. We immediately started discussing the transfer of ownership and what it would take to complete the process legally, organizationally, and operationally. By October 2021, the transfer of ownership was completed, and Robert Dolan successfully became the owner of Cashman Photo.

As stated earlier, I have discovered many companies throughout the region that are long-held operations with older partnerships or sole owners that are not well prepared for a successful transition of ownership. But be aware that I’m not just highlighting the need for proper planning due to the age of the ownership. Any established company should be thinking about the future of the company’s ownership to provide organizational stability, job security, and financial longevity should key personnel be sidelined by illness or other unexpected circumstances.

The first thing Mr. Dolan initiated once taking ownership of Cashman Photo was to implement a plan for his successors—several key individuals who have worked for the company for decades and are slated as the company’s future owners.

The process of creating a formal succession plan can be of great benefit to an organization in many areas. Personnel and positions most vital to the organization are identified above and beyond the ownership. The process also forces a critical assessment of organizational processes and procedures, which leads to improvement in day-to-day facility operations.

When necessary, targeted employees receive substantial training and professional development opportunities that help them prepare for advancement within the organization and potential ownership opportunities. A properly developed succession plan also allows key individuals the ability to cross-train, which helps them better understand their peers’ roles and can ultimately improve organizational troubleshooting. These activities will help create an environment where employees feel valued and have a clear path for advancement. That also leads to establishing invested employees, which improves organizational culture, and increases employee retention.

The average employee tenure at Cashman Photo is over twenty years.

Succession Planning for a company can fall into two categories: Emergency or Defined. In each case, there is an intensive review of the company, including the following:

• Identifying the critical roles within the organization, compiling success profiles for each key position, and assessing the staff to determine if the key players are already within the organization or must be solicited from outside the organization
• Creating a development plan and identifying successors
• Preparing implementation of the successor plan when ready.

Each succession plan is a living document that must be constantly reviewed, assessed, and edited as time passes and circumstances change.

I firmly believe that every company owner, no matter the size of their business, should keep the idea of succession in the forefront of their mind. Some owners have it easy when a family member is already part of the organization, ready and eager to step in when the time comes. Other business owners have key long-term employees with the same drive and incentive to maintain the business operation consistent with the previous ownership willing to take the helm in the future. But most do not have either of those scenarios available to them. So they must decide eventually to sell the company as part of their plan to an outsider or let the company close after they choose to retire or something unexpected happens that forces the company to shut down.

Finally, there is a question of legacy. Legacy means many things to different people. For the business itself, the term may be defined as nothing more than a continuation of sustainable operations. For others, the term legacy may extend beyond that into community relevance, reputation, or family involvement. There is a point in the ownership of a long-standing business at which its very existence becomes more than a place of wealth building and employment—the business itself becomes identified as an institution.

No matter how a business defines its legacy, I can always provide a long list of individuals and other business entities who truly rely on its existence. We understand there are no easy or guaranteed steps in running a business. Trying to operate a business on a daily basis plus completing the work to effectively pass it on intact to a successor is no easy task but doing so correctly provides amazing rewards for founders and their survivors, or those who take control of the business operation for future generations.

Should you require any assistance in business development planning, succession planning, corporate restructuring, or access to capital: Contact Silveridge Group LLC at jamato@silveridgegrp.com