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The time to create a business succession plan is now

A business is a legacy. Whether it’s a small operation, a family effort or a large company, the business’ success directly supports family, loved ones and its surrounding community. As a business owner, you’d do whatever necessary to protect this legacy, right?

Surprisingly, a significant number of owners are completely ignoring one of the most important aspects of ensuring a business remains healthy long into the future: succession planning.

The importance of business succession planning

A business succession plan is, at its core, a guide. It lays out what will happen to the business should you no longer be able to continue in your role. That could be due to a long-expected event, such as a retirement, or something unpredictable such as a serious illness or family emergency.

This could happen at any time. While difficult to consider, what happens if a car crash puts you in the hospital for a month? Or more tragically, if you do not survive? Consider these questions:

  • What happens to your shares of the business?
  • Who takes on your key responsibilities?
  • Is there someone ready to step into your role?
  • Will certain financial accounts be disrupted?
  • Does your operating agreement include measures for what to do in this situation?

Without a clear answer to these types of questions your business may be thrust into a tenuous situation, with your colleagues and family members forced to mire through unresolved issues.

Taking proactive measures

The stakes here are very clear, yet many entrepreneurs still lack a succession plan. According to a survey cited by CNBC, 72% of business owners said they did not have a succession plan in place. In a separate survey, 80% of respondents said they were too busy dealing with the day-to-day realities of their business to worry about a long-term plan.

While proper succession planning requires a small investment of your time, it does not need to be complicated. The Denver Post story mentions some good starting points. That includes:

  • Ensuring someone trustworthy can sign checks and purchase orders, and manage financial accounts
  • Listing what you do – and who will be responsible for those things should you become unable to carry them out
  • Considering insurance that may allow your business to hire someone on an interim basis to weather the initial storm
  • Addressing partnership agreements, such as the right to buy your shares
  • Identifying and training a potential successor

The most effective estate plans are thorough. For a business owner, that means making considerations for the company you’ve spent years building. This is a piece of your legacy. Treat it as such.

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