Creating a succession plan for your business is a smart and natural step in owning a business. The plan helps to ensure a smooth transition to the next business owner and will give you peace of mind that the continuation of your business has been planned for accordingly.
While there is not a one-size-fits-all approach to a succession plan, the formal plan is precisely what it sounds like: a roadmap for who will take over your business and when.
Typically, a solid plan will take into account:
Your successor. Naming a successor takes planning and requires a careful analysis of employees (or family members). While you should plan early for your business’ succession, you don’t want to plan too early before you have a good grip on your best choice of successor. Your plan should also include a training plan for your successor to ensure they will lead the company to your satisfaction, and it would be a good idea to have a written profile of the duties, responsibilities and expectations of your role as the leader of the company.
The timetable for when the plan will go into action. A written timetable will help to ease the transition and prepare you, your successor and your business for the changes ahead. A well thought out succession plan should also include a period in which your successor takes over while you are still present, so that you may help guide and train them and your business will benefit from avoiding an abrupt change in leadership.
The transfer of ownership and worth of your business. Will it be an outright sale? A gift? If it’s a family business, there will also be additional tax implications to take into account. When you decide to move on, whether you’re the sole owner or a partner, it’s also necessary to have the worth of your business appraised.
Your retirement plan. While planning your exit, you should take your own retirement into account, including investing in retirement plans and life insurance, as well as planning for how you’d actually like to spend your retirement. The transition to your successor will be smoothest if you have well-laid out plans to move on to.
Of course, there are many things to consider when planning for your business, which is why it is wise to consult with outside experts, like an accountant and your attorney, who can provide counsel on the legal aspects related to your succession plan.
It is your business that you worked hard for and a well-designed and executed succession plan will work to ensure that it continues even after you’re gone.