One question I am commonly asked by our business owner members is “How do I form a succession plan for my business?”
This is a global issue as baby boomers face the end of their working lives and start to think about retirement, and about what will happen to their businesses which, in many cases, they have spent decades building up.
Small and medium size business owners in particular have a lot on their plate, and often succession planning slips rapidly down the to-do list. Planning for succession can be a difficult and challenging task and, in most cases, takes a couple of years to work out.
However, it’s never too early to plan an exit strategy from your business.
When a business owner retires, becomes incapacitated or passes away it’s often necessary to shut down an otherwise healthy business.
Similarly, those left behind can inherit a healthy business, which is forced into bankruptcy because of a lack of management capacity.
Business closures cause massive disruption to staff, clients, training, subcontractors and suppliers. A typical reason for a business not being able to continue trading or to be sold is that the business owner “is” the business, and it’s not able to function without them.
Putting in place a business succession plan will give you control over how the future unfolds for you, your new stakeholder(s) and your business when the time comes to retire.
There are plenty of web sites to offer direction, but your accountant and lawyer should be the best advisers — the accountant for the financials, tax etc, and your lawyer to help figure out the big picture of what you want for your life.
A succession plan should define exactly who will take over the business, when they do this and how they will do it. It should also address a variety of financial, legal, operational and tax strategies.
Each plan will be highly personal and depend on the owner’s objectives, family situation, financial position and a host of other considerations.
For family-run businesses there can be additional pressure and emotional factors at play, making it all the more important to draw up a formal, strategic plan.