Most business owners know they need a written Business Succession Plan but in reality very few have taken the time to develop one. Whether you decide to sell your business to retire, to get out of the business to try something else, or be forced out due to health reasons, it’s important that you plan for that day… whenever it may come. By having a plan in place, you ensure future business decisions reflect your vision and desires, rather than someone else’s. If your business is to continue when you are no longer there, it’s crucial that you consider questions such as:
- Who will run the business and make the big decisions in your absence?
- How can you empower someone else to manage the business financials and minimise the risk?
- How can you maximise the value of your business for a future potential buyer?
- Will your employees be retained by the business and otherwise be looked after?
- How are your key staff incentivised to make the business run and grow without you?
- Will your family and staff be looked after, especially in the event of your death or inability to work?
- Business succession planning is a process that should enable you to address all of the above issues … and more.
The steps to a successful business transition
The nature of the transition will help you determine the preparatory steps. Of course, the timing of some events such as death and disability cannot be planned for, and consequently they have some unique requirements, including buy/sell agreements and life insurance contracts. On the other hand, if you are planning to retire or take up a new venture, it will be most beneficial to everyone concerned by considering the following steps:
- prepare a senior employee to take over the running of the business, or employ someone new to take on this role;
- ensure your business records clearly show how your business is doing and the methods you use to achieve this;
- review your employees’ contracts to ensure they are protected when a new owner takes over;
- keep your clients and suppliers informed of your plans; introduce them to the new owner and implement a transition phase to make sure it all goes smoothly.
When should this planning begin?
Too often many business owners wait until the last minute when important windows, including the potential un-insurability of a principal or key employee, have closed. Once your business has survived the start-up stage you should consider planning for death and disability outcomes. Otherwise, it may be suitable to consider this transition several years prior to your exit allowing plenty of time to bring a senior employee up to speed or for your clients and suppliers to build trust in a new business partner? By planning your exit well in advance you can maximise the value of your business and leave it with a sense of accomplishment.
To speak with one of our Business Strategists regarding your Business Succession Planning, please contact us