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Why business owners need a succession plan

You may have spent years working hard to build your business. You’ve seen it succeed and grow. You hope it will thrive for years to come. Yet, you’re beginning to think about retirement. Who will take over your business in the future or if you pass away suddenly?

You should consider creating a business succession plan to protect your business. As part of your business succession plan, you will:

  • Make a list of potential successors and note their strengths and weaknesses for running your business.
  • Create a timeline for when you plan to hand your business over to someone else and include circumstances when your business succession plan should be used (for example, if you die suddenly or become incapacitated in an accident or because of an illness).
  • Include standard operating procedures for your company, training documents and your employee handbook.
  • Include a valuation for your company. The valuation will establish what your company is worth and you’ll need to update that frequently if you continue to run the company for a few years.
  • Note how your business succession plan will be funded. Will your life insurance policy cover the costs of your business succession? Will your transferring ownership of the business to an heir come out of other estate assets? Do you have a picked successor who plans to buy the business?

Creating a business succession plan is an important part of being a responsible business owner as you near retirement. You don’t want to leave your managers and employees scrambling, not knowing what to do, if you pass away suddenly. If you have determined who your successor will be, you can note that in a business succession plan and have a formal roadmap for them for the future.

With a business succession plan, you can have peace of mind about your business’ future. You know you have a solid plan to ensure your longtime clients, customers and employees are taken care of. You will know you’ve set up your business to succeed whether you are leading it or not.

 

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