Small business owners are human beings. As such, many would eventually like to retire or spend time with their families. In addition, even those that do not could eventually fall sick or die. Unfortunately, due to the day-to-day pressures of running a business, many small business owners do not have a business succession plan in place to address these possibilities and eventualities.
Having a business succession plan is vital to ensure that the business continues uninterrupted, should the owner die or move on. In addition, a plan can give the business a leg up on its competitors by eliminating the chaos-and the advantage it would give to competitors-that these events could cause if the business were unprepared.
Ensuring a Flawless Transition
To ensure that the business transition is a success, it is important to start planning the transition as soon as possible, in order to give the business owner(s) sufficient time to determine the person(s) that would be the best fit to run the company. As such, it is generally recommended that business owners begin the succession planning process at least five years before a change in ownership is anticipated. However, since death can occur at any time, it is never too early to start.
When choosing a successor for the company, it is important for the business owner(s) to keep the needs of the business in mind. Because of this, it is never advisable to assume that a high-performing employee or a close family member is willing or able to step into the role. Instead, it is important to find someone who will not merely copy the current owner’s policies, but has a vision for the company’s future coupled with the drive to make the vision a reality.
As soon as possible after the succession decision has been made, it is important for the business owner to inform the board members, employees and successor(s) of the changes. This allows the business owner (and others in the business) to groom the successor, pass on important knowledge of the finances and operations of the business and determine whether the successor would be good fit in the new role.
It is also important for business owners to know the value of their business. As the true value of a business is much more than the price at which similar businesses have recently sold. A properly done business valuation will be a central factor in the decision making process for a small business owner’s succession plan. A business owner should seek a business valuation by a qualified professional when undertaking their business succession plan.
An Attorney Can Help
A business succession plan needs to be in place to ensure a successful and efficient transition of the business. An experienced business law attorney can advise you throughout the succession process, ensuring that the transition of the business goes smoothly.