Busy building your business and your wealth that you haven’t had time to sit down and think about some very important things such as your business succession plan? Well, consider yourself in good company. About two-thirds of business owners do not take the time to think about the future and put a plan in writing. Be like the other third and consider these 3 things so you can get this important item checked off of your list.
1. Do as you say, not as you do. You probably have or have considered policies and procedures for how your business should run and what is expected of your employees. It’s great to have this well thought out information readily available. What about having a plan for what happens with the business if something happens to you? Your company needs to be prepared for the worst. If you die or become incapacitated, what’s the protocol? What if one of your C-level employees dies or suddenly leaves? It happens. Don’t be caught off guard without a plan in this scenario. If you’re prepared, everyone will know who’s in charge in the event something catastrophic or unexpected occurs. This can help ensure that work goes on despite the tragedy or ill-timed circumstances. After all, you’ve worked long and hard to build your business. Don’t let your business go under if something bad happens.
2. Put a short list together for possible successors. Identifying and training the person who you’d like to replace you isn’t always an easy task. While you may think that the person who you’d like to step into your shoes seems obvious, you should have an organized approach for assessing and cultivating the talent pool needed not just to replace yourself but others across your business. This helps minimize business downtime due to unanticipated changes with personnel. Consider the experience and skill sets needed for key positions and take a close look at your current employees and ones just coming on board. If there are any employees who are ready to be groomed over the next couple of years, start developing that talent by providing training, resources, and other tools so that these individuals are ready to step up to the next level within the organization.
3. Structure your financial exit for a smooth transition. There are several ways to form your business, i.e. sole proprietorship, partnership, corporation or LLC. When forming your entity, think about ways to make the business succession go smoothly and how you might want to transfer ownership to someone next in line. If it’s a family owned business, what are the parameters of selling to the family member? Would you sell your entire share or partial share to a family member or to an outside individual or entity? Having a plan in place can help with your exit strategy and prepare you for the tax implications upon the sale. It can also help reduce conflicts that arise when there are differing opinions about what the sales price or company’s valuation should be. Once that figure has been determined, you’ll want to further prepare the company financially by funding the succession plan with life insurance in the event of an untimely death.
When you own a business, it’s critical to prepare for the future. Think about attracting, training, and retaining quality employees. Put your exit plan into place and fund it so that the business is prepared for any situation that arises.
For more information on ways to protect your business and plan for your business succession, schedule an introductory strategy session online at graceleelaw.com or call us at (703) 319-7868.