Business founders and owners are like the rest of us and do not work forever. Businesses, especially smaller businesses, should plan and prepare for future leadership. Succession planning is important to assure that the business evolves, stays relevant and competitive, meets the demand of its customers and complies with small business law requirements.
Begin planning now. Even if your business is a new venture, incorporate succession into your business planning.
Have a long-term plan that addresses your eventual retirement and a short-term plan in case an emergency prevents you from working or forces you into an early retirement. Consider temporary and short-term absences because of unexpected medical leave, a family death or economic problems.
A thorough and accurate business assessment is needed. This requires that business leaders, financial advisors, lawyers, accountants and other key personnel are involved in the planning.
They must work together and agree on the businesses’ strategic direction and goals and how these will be met. After this succession strategy is achieved, the business can address sales to a third party, family succession and other strategic matters.
The plan should also incorporate the owner’s retirement planning. The succession and retirement plans must be coordinated and achievable to be successful.
Succession planning should take personalities into account. This is especially important if successors involve some, but not all, family members.
Family dynamics have to be considered. Your participation in the business after succession and family disputes should be addressed. Clear provisions in sales documents may also reduce tensions and misunderstandings.
Review and update
Succession plans need to evolve with changing circumstances. Review and update these plans periodically with your advisory employees to assure it meets current business needs.
Plan testing is also recommended. Have your successor, for example, assume more leadership and business responsibilities when you are on vacation.
Attorneys can provide options and ideas that meet these needs. They can also prepare legal documents and contracts for succession planning and other business matters.