Succession planning is a well thought out process to ensure a family-owned business successfully transfers to the next generation, or to an external party. To be frank, it’s a massive topic, which is exactly why a lot of business owners avoid even thinking about it. However, it’s critical to not only think about it, but document and write out a plan that covers multiple aspects. With the right information and tools, writing a succession plan doesn’t have to be such an overwhelming task. Here are some important points to keep in mind:
Start early. A lot of business owners look at succession planning as a transaction instead of a long-term integrated strategy. To make the transition as seamless as possible, planning should begin 3 to 5 years prior to the succession date. The sooner the planning is started, the more flexibility there will be.
Enhance current business value. Similar to the concept of fixing up a home before putting it on the market, enhancing a business before selling it will help maximize proceeds. This could be anything from increasing operational efficiencies, investing in new resources or equipment, or training staff to ensure the strongest team possible.
Create a personal family plan. A business owner should be laying out a personal financial plan that also includes immediate family members. This should include any retirement needs, estate planning, and making sure they’re still able to meet any needs that their family may have. It’s important to sort out how loved ones will be taken care of after a succession.
Create a life-after-business plan. It may seem unnecessary, but a business owner needs to plan how they’re going to stay and active after the succession. Most entrepreneurs struggle with this. It’s a subjective topic which is why it’s often overlooked. But it’s an important topic that often prevents a lot of business owners from taking action. Some owners want to spend more time traveling, some want other things. It’s specific to each owner so they need to have those conversations with loved ones and advisors.
If you’re a business owner who hasn’t begun thinking about a succession plan, meet with a trusted advisor. For the best outcomes, talk with someone who can assemble a team that can address a range of disciplines within your business to ensure both a smooth transition and, ultimately, your happiness.
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