Business Succession Planning

Many entrepreneurs and business owners are unaware of the risks associated with not having a succession plan. For different reasons, they simply ignore the need for one, or they find it too painful to create the plan for transition because they feel that very few owners actually follow through on that plan.

As we covered in other articles, succession planning is important and allows you to determine how, when and to whom you will transfer your business. It also ensures that you preserve your company’s value, and you are prepared for a potential sale or any unforeseen event.

Challenges as the Business Owner

If you are an entrepreneur or co-founder, you will have founded the business and, regardless of how much it has expanded or changed over time, the business is still your “baby”. You imagined it, created it and nurtured it through tough times, and proudly watched it grow. You are intimately connected with its daily ebb and flow, and may not be able to imagine what you would do if you couldn’t continue to lead the organization.

So, why should you plan for your transition? Well, it’s your responsibility to plan for your transition and you are the only one to do it. Transition of your business to family or a sale to another company will occur regardless of whether it’s planned or not. And if you don’t deal with succession and transition for your business, who will do it instead?

The idea of planning to sell your business might seem scary. The business transition will change your role as owner-manager of the business to something else. When planning for a transition, you will visualize your ideal lifestyle, strategize and set goals for the successful execution of your plan. Advisors can expertly guide you through the creation of your plan to avoid many of the mistakes suffered by others. Most importantly, you will take action on the plan, starting immediately.

The Benefits of Succession Planning

Succession planning is one of the most important things you can do for your successful business and carries the following important benefits:

  • It puts a strategic plan in place for the next stage of the business.
  • It enables other talented employees to step forward, grow and take on more responsibility.
  • It increases the value of the business by replacing you, the founding entrepreneur, with a team that can manage and run the business.
  • It can be invigorating for you, leading to a new and exciting chapter in your life.
  • Loyal family members or existing leaders may be rewarded with more responsibility.
  • It creates stability and the retention of key employees in the business when employees know what to expect and how things will evolve.
  • It prepares and positions the business to be sold at the right time for the right price for the least amount of tax and minimal business disruption.
  • It enables you to set up a secure income outside the business that is not vulnerable to downturns or to your diminished capacity.
  • It ensures that suppliers and clients feel more secure, which means that they’re less likely to transfer to competitors.

In addition to these key advantages of succession planning, the stakeholders in the business as a whole benefit when you take responsibility to guide the transition process to its optimal conclusion.

If you don’t make a plan, the government, lawyers, management team and your family members will have to take charge of the business by default in the event of your premature death or disability. In other words, no plan will have been put in place and events may not proceed in the way that you would have chosen or liked.

To conclude, business owners who plan for retirement and voluntarily exit their businesses are three times more likely to be satisfied with the retirement experience and adjust successfully to the role of retiree. The time for your business transition plan is now! Let us know if we can be of service.

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