Whether retirement is 30 years away, just over the horizon or not in your game plan at all, a succession plan is vital to ensuring the continued success of your business. A good succession plan can help with the following:
- Transfer ownership when the time comes
- Maintain your lifestyle in retirement
- Provide for your heirs financially
- Prepare the business to handle unexpected events
Why is a succession plan so important? Life happens and unless you have a plan to deal with the unexpected, the business you worked so hard to build could crumble if you become disabled, die, get divorced or decide to split with your business partner. Think of a succession plan as peace of mind for the business you’ve worked so hard to build. Here are some steps you might follow to develop an exit plan:
- Decide how to exit your business. Should you:
- Transfer the business to your heirs
- Sell the business to your business partner/s
- Sell the business to a key employee
- Sell the business to an outside buyer
- Conduct a business valuation
- Even if you aren’t planning to sell your business, conducting a business valuation has many benefits. It helps you develop a retirement income strategy, properly value future owners’ shares, and purchase adequate insurance for protection planning. It can even make it easier for your business or potential buyers to get loans or attract investors.
- Prepare for transition
- The transition period to new ownership is a vulnerable time for a business. Prepare both your successor and your business for a smooth hand-off.
- Review your plan regularly
- Creating a succession plan is a big accomplishment, so give yourself a pat on the back. But don’t just file your plan away and forget about it. Over the years, key employees may leave your business, family members may lose interest in taking the reins, and your own plans for your future may shift. Reviewing your succession plan annually with your team of advisors will help ensure a successful and seamless transition — no matter when or under what circumstances it happens.
Owners who have considered an exit strategy for themselves should also ensure the following three priorities are addressed during any transition:
- Making sure the company remains viable in the long run.
- Ensuring that employees continue to have jobs and a future with the organization.
- Continuing to seamlessly meet customers’ needs without any disruption of delivering products or services.
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Copyright ©John Trenary 2021
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