Business succession planning involves a series of financial and logistical decisions about who will take over your company upon retirement, disability, or death. When a person owns a small business, company, or organization that accrues revenue, he or she has the ability to transfer ownership of the entity to another person. In many cases, the transfer of ownership works in the same way as a standard company sale with provisions. However, the owner may choose to give the business without any necessary conditions. Learn more about business succession planning, the steps in a succession plan, and why you should talk to a business law attorney during the planning process.
Steps in Business Succession Planning
When you have your own business, you often think of your current operations and growth. While focusing on the short-term is important, you also want to consider where you want your business to be years down the line. Business succession planning helps business owners’ better plan who will take over their company when they are gone. There are several essential steps in the succession planning process. These include:
1. Choosing a Successor
The first step of business succession planning is to choose the right successor. Will you choose a family member or perhaps a business partner? Will you choose just one person or multiple individuals? When deciding between candidates, consider some very important factors. If you are choosing a family member, consider whether they can afford to buy the company or if you are willing to transfer it without payment. Also consider if the person is able to handle the responsibility and leadership role that comes with owning a business. If you are choosing a business partner, consider if you feel secure handing over your part of the business.
2. Developing a Training Program
Once you have chosen a successor, you will want to help this person prepare for business ownership. This can be achieved through a comprehensive training or mentoring program. Spend adequate time grooming your successor to be a leader in the chosen role by developing essential skills. During the training program, be sure to introduce your successor to suppliers and customers. This allows your business to continue running smoothly even in your absence. You can also gain the peace of mind that comes with having a qualified and experienced successor for your business.
3. Setting Timetables
As a business owner, you have poured your money, time, and energy into growing your company. Unfortunately, many business owners make the mistake of not having a successor to continue their legacy. To ensure that your business will remain in good standing in the long-term, set realistic timetables and objectives. Set goals for your company early on and evaluate them at least once a year, making modifications as needed. While thinking about your vision for your company in the upcoming years, set measurable objectives and estimated completion dates. This information can be useful for your successor down the road.
4. Planning Your Own Retirement
Part of business succession planning also focuses on your own retirement. Ideally, you want to plan for a comfortable retirement many years in advance, giving you plenty of time to get your finances in order. Consider what your cash flow will need to be during your retirement years and make any adjustments needed to reach this number. Having a safety net is crucial not just for your financial safety, but also your peace of mind. You may want to consider enlisting the help of a business law attorney for guidance when succession and retirement planning to ensure that you are on the right track.
5. Executing the Succession Plan
When it comes time to execute your succession plan, you want to make sure it is done in the proper manner. If you have made all of the preparations for your departure in advance and your successor has undergone the training and mentorship needed to do well in your chosen business, executing the succession plan should be as easy as handing over the company. Ideally, you want to execute your succession plan while you are still alive, giving you ample opportunity to help your new successor along if needed.
Contact a Business Law Attorney
Well before planning your exit from your company, you want to develop a succession plan that allows you to easily step out of your role while your successor steps into a new leadership position. As succession planning can be complex depending on your industry, the size of your business, and similar factors, it is best to recruit the help of an experienced business law attorney. An attorney can also help reduce potential liabilities while speeding up the succession process. For more information about business succession planning, contact the professional business law attorneys at OFP Law.