Planning for Success[ion]
All too often, business owners neglect to plan ahead for the succession of their business. While lack of planning is likely to affect how an owner transitions out of their business, there can also be severe implications that could impact the ‘when’, ‘what’, ‘who’ and ‘why’ aspects as well.
As a business owner, you have worked long and hard to build up a valuable asset and at some point down the road you will likely want to enjoy the fruits of your labour and retire. Between now and then, however, there are a number of questions that need to be answered:
- When do you want to retire?
- How are you going to retire?
- How much will you need in order to retire?
- Who will run the business if you are unexpectedly injured and no longer able to work between now and your expected retirement date?
- Are you going to sell your business, pass it along to another generation or just close the doors and walk away?
It is human nature to generally fear the unknown, which means that issues and questions like these are often brushed aside, with the intention of dealing with them “later”. Addressing your own succession involves answering a lot of difficult questions for you, the many other people involved with the business, and your family. Besides, your time is much better spent managing the day to day operations of the company, right?
Wrong! The old cliché is very true in this case – we are often ‘our own worst enemies.’ A lack of preparedness for the transition of your business can ultimately harm the company and lead to family conflict and discord. That’s why it is so important to find the options that best meet the needs of all involved parties. A good succession plan should summarize the decisions made and the rationale behind each decision. It should also clearly communicate everyone’s role going forward. A written succession plan acts as a road map and a contract to ensure everyone involved supports and is accountable to the plan.
“A good succession plan should summarize the decisions made and the rationale behind each decision.”
A word of caution: the succession plan is not a static document; many of the assumptions used in the planning process may change over time. However, addressing the hard questions early on means tough conversations down the road can be handled more easily. The succession planning document should be reviewed and updated periodically to ensure that it remains in line with your objectives.
Due to the emotional component involved and the in-depth knowledge required of legal, tax, and financial issues, succession planning can be a very complicated process. Working with experienced and independent professional advisors can help accelerate the process and ensure that thoughtful deliberation is given to all issues.
In this series, Richter’s team of experts will lead you through the many considerations that you as a business owner must take under advisement, in order to transition your business successfully.
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