Planning for what is ahead is an integral part of business. And while you cannot predict the future, putting together a business succession plan helps you prepare for it. A succession plan lets you and your employees rest assured knowing your business will be in good hands after you are gone.
What is a Succession Plan and Why Do I Need One?
A succession plan addresses who takes over ownership interests and manages the business. Without a clear succession plan, you put the survival of your business at risk after you retire. Succession plans keep your employees from experiencing undue stress after you are gone and minimize estate, capital gains and income tax liability.
How to Create a Business Succession Plan
- Start early. You do not want to rush through the process of creating a business succession plan right before you retire. Take the time to create your succession plan allowing your business to succeed without you at the helm sooner rather than later.
- Meet with your advisors. Before drafting your succession plan, meet with your financial advisors and attorney. Your team of advisors can help make sure the succession plan is comprehensive and legal.
- Pick your successor. Before choosing a successor, evaluate all the factors that would make them successful in their new role. If you want to transfer ownership to a family member, consider whether they can handle the responsibility of running a business. You can also put together a formal training plan for your successor.
- Check your business valuation. Having your business valuated regularly is important. You may want to consider having a third-party conduct your business valuation to ensure it is accurate.
- Revisit and revise. Even though you should start the succession planning process early, you should revisit the plan frequently. Your circumstances may change and you will need to update your business succession plan to reflect those changes.
You can be confident that your business will survive – no matter what the future has in store – by proactively developing a business succession plan.