For many small business owners, their business is their life’s work. It is something that they have invested time, money, and a lot of heart into. When considering this, it can be downright surprising how many times small business owners fail to have a business succession plan in place. A properly crafted business succession plan can help ensure the continued longevity and success of a small business. If you are a small business owner, a business succession plan is a must.
What Should Be in Your Business Succession Plan?
As a small business owner, it can become seemingly impossible to keep up with day to day tasks, let alone take time to plan for the future. Planning for the future, however, should be a priority. You never know when something might come up that pushes you to early retirement or something happens that makes you unable or unavailable to continue running your business. This day may seem unimaginable, but sometimes the unimaginable becomes reality and you would be doing your business a major disservice not to have a business succession plan in place to guide the transition process.
When approaching the development of your business succession plan, you should focus on the goals and objectives you have for your business, even after you are gone. Outline what you want to see happen in your business and include it in your plan. Develop a vision and objectives for the business. These goals will help guide the next generation of management.
One of the most critical parts of your business succession plan will be naming your successor. In fact, you should name more than the person who will immediately succeed you, but you should also go through naming the successors of other key management team members. Your successor in particular may seem like an easy decision at first. Most people turn to a family member or a trusted assistant to take over the role. More thought and reflection on this is, however, merited.
First of all, you may have multiple family member options to choose from regarding naming your successor. You may also have key management employees who have served you well over the years that you should consider. In the alternative, you may want to seek someone outside of the company to bring a fresh perspective as your successor. Consider the strengths and weaknesses of these candidates. When considering family, especially, you will want to consider the lasting consequences and resentments that may be borne from choosing someone as your successor. Evaluate who you feel to be most competent and capable to be your successor.
A business succession plan should also address tax implications that the owner or business may incur as a result of sale or transfer of ownership, as well as the event of death or divorce. Furthermore, the plan should include the creation of a buy/sell agreement that is not only fair but is also inclusive of the value of the business and works to minimize tax consequences. There should also be a detailed plan establishing a mentorship program and employee transition period.
The transition in ownership will, no doubt, shake the core of the business. To help set things straight as quickly as possible, a business succession plan should detail what the transition period will look like and what it will involve. Develop a plan for connecting the transition team with mentors that will encourage critical areas of development. Set a plan for the development of communication skills and other important business skills.
Estate Planning Attorney
Do you need a business succession plan to help ensure the continued success of your business? Verras Law can help. Contact Verras Law today.