There are those who argue that a business should have a succession plan from the very first day that it exists. A new owner should include succession planning as part of the start-up process. They have to complete many other legally-related tasks, such as creating a partnership agreement, and a succession plan is one of the documents that they can consider when forming their new enterprise.
That being said, most business owners do not create a succession plan on Day One, and many of them simply put it off until they are about to retire. This procrastination is certainly one reason that not all businesses have a plan in place. If something unexpected happens, the business may have to be transferred to new ownership without that plan. An even more common reason, according to some reports, is that business owners are unsure where to start with their own succession planning. They know that they need a plan. They want to create one. They just don’t know what it is supposed to include or how to begin.
What do you need to consider?
If you’re a business owner who has been thinking about making a plan – but perhaps struggling with where to get started, you’ll need to identify someone who is willing and able to run the business. This could be a direct beneficiary or someone who is related to you, as in the case of a family business. But many owners alternatively leave the business to another professional or even an employee at the company.
It’s important to leave a direct plan that outlines the rules everyone should honor and what they are responsible for. Oftentimes, conflicts will arise when multiple people inherit a business and they all want to take on the same roles. A bit of guidance at the beginning can help to avoid this.
One of the best things that business owners can do is to get the training portion of the succession process started as soon as possible. For instance, you may not be planning to retire for the next five years, but you could bring on your successor and train them on the job so that the transition goes smoothly when it eventually happens.
These are just a few elements to remember when creating a business succession plan. Take the time to look into all of your legal options to get the process underway. As efficiently and effectively as possible.