Nobody starts a business without the vision of their creation one day outliving their working years. Whether the business will stay in the family or be sold to, owners wish to see their legacy protected – and for the business to continue to prosper, even after they’re gone.
Which is why it’s surprising that less than one-third of all private, owner-managed, or family-owned businesses have a succession plan in place.
The long-term endurance of a business, and the preservation of accumulated wealth, rely heavily on developing a solid strategic succession plan. Succession is the final stage of the business lifecycle, and the key to driving future growth, reducing taxes, and setting the stage for the next chapter you’ve always wanted.
Identify what’s important to you
No two succession plans are alike. Just as your business was built using your unique goals and vision, your succession plan should reflect your personal wants and needs.
Do I want the business to stay in the family? Are sale proceeds or future cash flow relevant to my retirement? How do I wish to spend the rest of my life? What goals do I have for next generation management?
Don’t be guarded about what you value but do align your strategy with family interests. Discuss thoughts openly with your family and business planning advisor.
When ownership consists of multiple partners, work together to find as close to a consensus as you can, while making compromises evenly along the way.
Choose a successor capable of running your company
Selecting a successor isn’t easy. You may have multiple heirs or key employees interested in taking over. Above all else, choose someone capable of running your company.
Once a decision is made, develop a mentoring program to groom your successor with the necessary skills and leadership qualities.
If you plan to sell your business on the open market, enlist the help of a business advisory to identify and qualify potential buyers.
Have the business professionally valuated
Knowing the current market value of the business is an integral part of the succession planning process. An in-depth valuation by a management consulting firm can identify strengths and discover untapped opportunities.
With this knowledge in hand, you can more easily set the business on a course for a more profitable exit.
Document your succession plan
Write down every facet of your plan with the help of an attorney, accountant, and business advisor. Include details for transition, insurance, taxes, and if relevant a buy-sell agreement with the chosen successor.
Your document should always include a contingency plan should one or more business owner die or be unable to lead the company sooner than anticipated. Double check that your succession plan does not contradict other estate planning documents.
Review the plan regularly
Just like a business plan, a strategic succession plan is a living document. As circumstances change, so should your plan. Death, divorce, rapid business growth or decline, M & A, changes in tax laws, there are countless scenarios the necessitate revisions to your plan.
It’s never too early to start succession planning. The sooner you begin, the more likely you’ll achieve the exit you desire.
Contact the talented team at Quest Business Advisory for a free consultation. Our Legacy service package offers guaranteed return on investment.
