Planning what to do with the business in the event of retirement or an unforeseen obstacle is on every entrepreneur’s to-do list. While this is an essential part of a successful business plan, many push these decisions to the side as these are not decisions that a business owner can make overnight.
The process is time-consuming as it is emotional. The hard truth is at some point, any owner or key employee in the company might retire, become disabled, or unexpectedly pass Without a proper plan in place, such an event could leave a company disoriented, mismanaged and without a course of action for how to continue beyond this critical individual’s departure. This is why it is so vital for businesses to prepare long before such a situation occurs. Planning, as well as protecting the future is essential whether you have a newly established business or are running a practice that has been in existence for years.
A little planning for the eventualities that each business will face goes a long way in ensuring that the company can weather whatever storms may lie ahead. Here are some things to consider when pondering business owner succession planning:
How it works
A business succession plan is a document that acts as a guide that oversees change in business ownership. It outlines step-by-step instructions and is comprised of the following:
- Specific succession dates and timelines
- Potential successors, including their strengths and attributes
- Standard operating procedures, including procedures, documents and employee handbooks
- The business valuation (that’s been updated through the years)
- The funding process, such as through a life insurance policy or a seller’s note.
Successfully implement business owner succession
While taking time to develop effective succession strategies is essential, implementing them is even more critical. As the future remains unknown, implementing a succession strategy properly will help prepare for eventualities that may befall a business.
But don’t rush your implementation process; take time to access the key attributes to ensure that the process is straightforward. This way, you will map out the future for any challenges that will come.
The Bottom Line
Creating a strategy to protect the things we have worked hard to achieve is common among most people, so why would protecting the business you have worked so hard to build be any different? Implementing a business succession plan can be complicated and involved, but business owners do not have to face the process alone. They should engage the services of a professional to take them through the process successfully.
Matt Slain, is a financial services certified professional at XXI Financial in Beachwood.
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