5 tips for small business succession planning

How are you going to exit your business? You might have dreams of your son or daughter taking over the family business, selling to pursue other passions or dream of going public. The truth is many small business owners don’t have an exit strategy. It’s easy to get wrapped up in the day-to-day tasks of keeping your business running. However, it’s just as important to have a succession plan for your business to be successful after you leave.

1. Build a team of trusted advisors

There are a lot of options when planning your succession. It’s important to have a team of trusted advisors, including lawyers, accountants, business partners and succession planners to help guide you through the process of developing a strategy that works for you and your company. You should be prepared to discuss the current state of your business and your dreams for the future.

2. Involve your family

This decision most likely affects your family, as well. Keeping in mind your current financial status, discuss with them what you’re thinking and keep them informed. If a family member(s) is taking over the business, what does the timeline look like? How might this affect family dynamics?

3. Develop a succession plan

Once you’ve got your team and have discussed some things with your family and business partners, you can start working on all the details of your plan. Identify potential successors within your organization, whether they are family members, key employees, or external candidates. Consider their qualifications, skills and commitment to the business. Find out what their aspirations are and their vision for the company.

4. Take time to work with your successor

Once you have identified your successor, work with them to develop a timeline for their progress that fits in with your overall succession plan. Make sure to address potential issues, so there is a plan for you to stick to if a situation ever arises. When the time comes prepare yourself for retirement and let your successor take over, you’ve trained them well.

5. Revisit your plan on a regular basis

Update and document your business processes, employee handbooks and training materials. Once the plan is made and in motion, it’s still important to revisit the plan on a regular basis. The plan might need to be modified or changed depending on the economy and your personal situation. Your team of advisors should also keep themselves up to date with any changes you make to the plan. Start regularly assessing the value of your business, understanding what things you can do to impact that value.

Regardless of your time horizon, now is the time to be thinking about your business exit strategy. How are you positioning your business to maximize its value in the future? What kind of lifestyle do you want to maintain following the sale? What are the tax implications of the structure of any sale? What is the legacy you hope to leave? It takes a team to help you sort out all those issues. Don’t know where to start? Give me a call or?send me an email at [email protected]