Business Succession Plans – Why You Need One
Succession planning for a large corporate enterprise is about finding the right person to inherit a particular job. In contrast, business succession planning for small businesses is critical. It’s all about the long-term survival of the company you worked so hard to build.
What Is Business Succession Planning?
Succession planning consists of developing and implementing a plan to ensure that a business survives the loss of a critical leadership role. A large business may have key people in some positions, but a small business is virtually defined by its founder and chief executive officer.
Retirement planning for this individual must include transition planning for the business. Business continuity and succession planning go hand-in-hand. Without solid and robust planning for future leadership, your business will not survive.
Succession planning isn’t simple. It’s not just saying I will retire at a particular date and time. It involves the complex interplay of management goals and strategies and consideration of who will run the business in the future and how.
Vermillion Law Firm is home to some of the best business lawyers Dallas offers. Our skills and knowledge can help you to understand your business, its long-term needs, and how to respond to those needs as you engage in the separation process.
Remember, your business succession plan is a contingency plan. The plans you make aren’t guaranteed to come through, but the thinking and planning required to develop your succession will make you more able to deal with whatever contingencies arise in the handing over of your business.
In making your plan, you will come to know your key people, your critical operations, and how and when your company makes money. And you will know them intimately.
This knowledge lets you focus on who and what is necessary. It also encourages you to begin to train the next generation of leaders so that, by sharing your skills, you can ensure the future.
Benefits of Succession Planning
Planning for your business’s future carries many benefits for the business. Among them are:
- Evidence of thoughtful and professional management
- Likelihood of long-term survival
- Potential for liquidating assets for the retiring owner
- Potential for planning long-term growth and changes to the company
In other words, planning for tomorrow makes your company stronger and more capable for the future.
What a Business Succession Plan Should Include
Your succession plan should include:
- A timeline of when and how succession will occur.
- A list of potential successors; you’re known competitors for years who will be good candidates; make sure those handling the succession planning do as well.
- Family, partners, and co-owners should be considered. You may not be the sole owner of your business or may have children who want to stay involved. Your plan must acknowledge the interests of these individuals.
To the extent, you know what should happen, include clear instructions. Ensure those implementing your plan know what you want them to do.
Use a professional business valuation service to have a relatively solid idea of what your business might be worth. If nothing else, this can help you determine how to proceed with departing from your business and how much you can expect to take with you.
Set out an exact plan for your chosen successor to afford to take over your business. You may have key-man life insurance, prearranged loans, or, more simply, you can finance the transition with your assets.
Take Advantage of Attorney Succession Planning
Second-generation businesses have a 60 percent failure rate. You can achieve your retirement goal and let the second generation running your small business hit the ground running. Work with an experienced small business succession planning group like the Vermillion Law Firm. Have the advantage of our experience with Texas business law and business succession to bring your business and your successors through the dangerous adventure in business succession.