Many small business owners do not realize the benefits of succession planning until it’s too late. Don’t let that happen to you! Here are 5 important things to consider now…
5 Things To Consider For Optimal Succession Planning
As a small business owner, you’ve likely invested much of your time into the strategic planning of your business so that it is both sustainable and profitable. One area of planning that you probably haven’t thought of, though, is succession planning.
Many business owners don’t get around to thinking about succession planning because they are so absorbed in running their business in the present, or they simply think it’s unnecessary because the day they hand over the reigns to their successor seems so far off.
The truth is, putting definition to passing on the baton is a key area of long-term business planning. You never know what tomorrow holds, so it’s crucial to prepare now.
So, how to do succession planning?
For corporations and large business entities, it’s usually a task reserved for human resources: HR departments lay out a training development plan to groom ideal internal candidates for key roles, or they have specific protocols and criteria in place that help them identify and recruit the best outside talent for those positions.
For small businesses, your succession plan doesn’t necessarily need to be quite so robust, but it should include a few key steps to ensure operations can continue seamlessly once you leave.
The importance of succession planning for your small business is probably greater than you think! Here are five considerations to keep in mind when writing your succession plan:
- Choose your successor. If you have a specific candidate in mind, you need to name them to avoid any feuds or confusion, especially if you run a family business.
- Distribute your property. Also known as your business assets, you need to prepare a buy-sell agreement that passes on your business interest to your beneficiaries. In the case of your business interests, the beneficiary would typically be a partner or co-owner of your business.
- Specify the type of business you own. Different types of businesses, be it an LLC or sole proprietorship, have different regulations when it comes to succession planning.
- Address outstanding debts or taxes. Any unfinished business should be tied up in writing. Do you want to liquidate your business and donate the funds, pass the wealth to an heir, or do you want to reinvest it into your business?
- Discuss your benefits. Once you retire, will you still depend on health care and retirement benefits your company provides? These details are important for other partners and board members in your company.
As you might imagine, succession planning can get complicated, so it’s always best to consult a legal expert to ensure your plan is legally binding.
To help you learn more about finding your business’s ideal successor, our friends at Bestow have laid out the process and benefits of succession planning in greater detail in the infographic below:
Have you finalized the succession plan for your business yet?