Tips to Successful Business Succession Planning
As many Baby Boomers approach retirement age, the consideration of what will happen to the businesses older individuals own becomes more important. Many business owners have invested their personal funds and spent their entire lifetimes building the business. Some ways that business owners can create a more effective plan include:
Get started early
Business succession planning requires close attention to detail and a well-though out plan. The earlier that a succession plan is considered and implemented, the better for the business owner and prosperity. A solid succession plan is implemented years before any actual transition of the business interest is made. Many business owners think about the end of their business when they first launch it.
Consider your vision
A solid plan requires the business owner to contemplate what it is they actually want to accomplish. If the business is a family-owned business, the owner may consider what other family members may be appropriate to lead the business. Additionally, a business owner may consider the key members of his or her current team and which non-family members may still serve a pivotal role in the business after the business owner transitions away from the business.
Form a team
Once a business owner has a clear idea about what he or she wants, he or she can start involving other stakeholders like family members, lenders, employees and buyers. A succession plan often relies on leaning on key team members, including accountants, financial advisors, lawyers, family members and valuation experts. These individuals each bring something valuable to the team.
Consider the emotional stakes
Startups and family-owned businesses can be very important to business owners and their identities. However, business owners must keep in mind the emotionally-charged nature of the decisions that they make. For example, if one child is left out, he or she may feel alienated. Additionally, succession plans sometimes go unmade because the business owner simply does not want to think about his or her own mortality or when he or she will no longer be part of what the owner helped create. However, delaying this process often adversely affects businesses.
Create a plan
A succession plan needs to be exactly that: a plan. The succession plan should contain a detailed outline of how the business owner plans to accomplish his or her goals. While the business is operating, the business owner should periodically consider whether the business operations are moving in the direction of the succession plan.
The business owner must carefully consider who he or she wants to become the new owner of the business. This may be a person who has shown particular promise, who has the ability to control the company and carry out the owner’s goal. It may take considerable time to properly groom a successor.
Review the plan occasionally with experienced legal counsel
A succession plan should not be a plan made at one point in time and then forgotten. Like with an estate plan, a succession plan should be reviewed periodically, especially if there have been life-altering events or events that recalibrate the business owner’s vision. A business succession lawyer helps business owners create a plan that effectuates their wishes.
At Altman and Associates, our knowledgeable Northern Virginia business succession attorneys provide trustworthy guidance to help you determine how you want to plan your exit from your business. We have the knowledge and experience necessary to protect your best interests. We identify potential challenges and work with you to create an innovative, personalized solution. Contact us at (301) 468-3220 or online to schedule a consultation.