Much like it is never too soon to think about estate planning, it is never too early to think about the future of your business. Even if you’re in the prime of life, enjoying the height of success in your business, it is smart to set up a succession plan for the simple reason that life is unpredictable. It’s unpleasant to think about, but accidents happen and so do sudden diagnoses. It’s better to strategize now. Your family, your partners and your employees will thank you if such a plan becomes unexpectedly necessary.
What are your long-term business goals?
As a business owner, the first step of succession planning is to consider what you want for the business after you are no longer at the helm. Do you want to sell your share to a partner? Pass the business to a family member or friend? Sell the company outright? Once you know your intentions, the idea of succession will become more tangible. Now you can begin to prepare.
What are the steps to successful succession planning?
- Get the company financials organized. All your important legal and financial documents should not only be filed safely and securely but also backed up electronically for ease-of-access. This list of documents might include valuation data, inventory, tax documents and other important records. Potential buyers—even a family member coming in—will want and need to view this information. Getting your financials in order positions you for success in the short-term as well, as it is likely to improve day-to-day efficiency for those who need access to these documents.
- Obtain buy-sell agreements with relevant parties. If there are multiple owners or partners in your business, establish legal contracts that give one party the rights to the other’s share of the company in the event of unexpected illness, untimely death or waning interest in continuing as part of the company.
- Choose potential successors. By selecting the individual or individuals in advance, you will be able to train the future caretakers of your business and minimize upheaval at the time of transition.
These are the three key steps in the succession planning process that every business owner should consider. Responsible business necessitates a forward-thinking mind. You have put so much work into your business already. Considering how it will live on is a natural next step.