If you own a business, a business succession plan needs to be part of your estate planning. Remember that a succession plan doesn’t just detail what will happen to the business if you pass away. It can also influence a transition in leadership whenever you choose to retire or hand over the reins.
No two succession plans look alike. What’s important is to have solid guidance so that you can create a plan that will allow the business to continue and thrive after you’re no longer at the helm.
Develop the plan early
The earlier you develop a succession plan, the better you can prepare those who will take over for you to do so. Five to ten years before your planned retirement is recommended. Some people develop a succession plan almost as soon as they start their business. You can always make modifications – for example, if one of your adult children decides they don’t want to be involved in running the business. You may even decide to turn it over to a trusted non-family associate.
Discuss it with your family
If family members have been involved in running the business and expect to continue their involvement after you leave, it’s important to discuss your succession plan with them before you finalize it (or even before you begin). Identify who wants to take over and – more importantly – whether they’re the best person to do it. If they just need some more experience, you’ll have plenty of time to mentor them. There’s no guarantee these discussions will be conflict-free if more than one child wants to take over, but it doesn’t have to turn into TV’s Succession with siblings fighting it out for the leadership role.
Focus on what’s best for the business
While much of your estate planning likely involves doing what’s best for your children, your succession planning should focus on what’s best for the business. That may mean selling it when you retire or designating that it be sold should you pass away before that. You likely have employees and others who depend on the business to run smoothly and be successful, and that can’t happen if those in charge don’t have the necessary skills, knowledge, temperament and drive.
A good first step is to secure legal, financial, tax and other professionals on your side who can answer your questions knowledgeably and help you make critical decisions about what will happen to your business after you’re gone and to do so in truly informed ways.