Succession plans are typically created to prepare for the owner’s retirement or untimely disability or death. Research shows that 78% of small business owners responded that they plan to use the sale of their business to fund their retirement. However, just 25% of private business owners say they have a succession plan in place.
The Houston Business Journal’s recent article, “Three tips to employing establishing a strong succession plan,” takes up this matter for discussion.
Applying a proactive succession plan may help your business successfully move to new leadership and keep operations running smoothly. Here are a few tips for establishing your succession plan.
Regardless of whether you’re going with a family member to succeed you or bringing in someone from the outside to take over, it’s important that the plan is communicated beforehand. You don’t want workers speculating or feeling blindsided by the decision.
Be sure that you have legal documents in place and clear expectations, guidelines, and rules, so there aren’t any gray areas when the time of transition comes.
If you are appointing a family member, set out details on how other family members will contribute to the company if they are interested. You could have more than one family member run the company, but it may be best to have one clear decision maker.
If you want to have an outside party come in to run the company or have a longtime employee assume leadership, be open to ideas. Don’t overlook someone who may be a good leader and a good fit for the position. As business climates shift, technologies advance and workplace skills change, make a selection of a leader who can adapt to those changes.
As you create your succession plan, leverage a team of experts, such as an estate planning lawyer and an accountant. You should also work with a business broker who can provide a realistic valuation of your company.
Reference: Houston Business Journal (September 3, 2019) “Three tips to employing establishing a strong succession plan”
Suggested Key Terms: Estate Planning Lawyer, Retirement Planning, Business Succession Planning