In the day-to-day business of running a company, most business owners and managers find it hard to dedicate the time or energy needed to focus on a succession plan. However, having a well-developed plan for who will run and own the business when you leave it is a very important factor for entrepreneurs to keep top of mind.
No matter the size of your company, whether you have two employees or two thousand, you need to consider succession. Having a succession plan in place will ensure that a smooth transition can be made for new management and that the value you’ve so carefully created in the business is maintained.
To plan your exit strategy and the company’s future outlook carefully, there are a number of factors to consider.
As well, there are plenty of other things to take into consideration, from establishing objectives and seeking out planning advice, to the all-important decision about who should take over the key positions in the firm. If you’re keen to get your succession plan organized in 2015, read on for some top tips to keep in mind.
Start Planning Early
One of the best tips on succession planning has to be just to start, and as early as possible. Remember that it can take a decent amount of time (often up to a year or more) to put a proper plan in place, and a number of years to actually implement it.
To start with, it’s vital that you have an up-to-date last will and testament in place in case you pass away unexpectedly. This will ensure that disputes about ownership don’t sink the business after you’re gone.
You might find that you have to consider and test a number of potential successor candidates before you find the right person to take over the running of the business, or you may need time to see how various family members might work in the firm. As a result, it’s important not to wait too long to begin the process.
In addition, training a potential successor, and then gradually handing over the reins (or indeed looking for suitable buyers of the business) all takes time. Avoid the trap of waiting too long to start your planning and you’ll save yourself a lot of stress.
Set Goals and Objectives for the Business
A critical step in succession planning is to set specific goals and objectives for the business so that you, and the rest of the team, are clear on where the business is headed and how you’ll know if you get there (or are veering off track). Once you have these plans in place it will be easier to determine who will be the best fit to lead the company over the coming years to achieve these goals.
In addition, you should also determine your own personal retirement goals, and your cash flow needs for the future. This will help you to work out a suitable sale price for the business or for your share of the ownership.
Seek Out Specific Succession Planning Advice
Another top tip for succession planning is to seek out a suitably-qualified advisor who can provide you with up-to-date succession planning advice. In fact, due to the complexity of many succession planning matters, you might even find that you require the advice of a number of professionals, including lawyers, accountants, financial planners, business valuers, and the like.
It’s a good idea to shop around for the right people to suit your needs too. Different business sizes and set ups will require different advice, so it’s generally better to look for experts who are very experienced in dealing with your particular type and size of business.
Create a Plan for the Transition
It’s also always a good idea to create a specific plan for the transition so that the process goes more smoothly. You’ll want to establish a timeline that details when and how the implementation of the succession plan will occur, and have this checked over by your advisors to ensure there won’t be any legal or taxation issues with what you have proposed.
The plan should detail the specifics of the business handover. For example, if a family member is taking over the company, will they be purchasing ownership of the business, or will you be giving it to them as a gift/bequest? Or alternatively, will a combination of these ideas be involved? Work these issues out in advance for a streamlined handover when the time comes.
Start putting the above steps into place today and you will not only save yourself time, money and energy over the long run, but also help to ensure your business continues on into the future without you.
This article was syndicated from Business 2 Community: Essential Tips for Creating a Succession Plan for Your Business
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