Small business owners simply can not remain in control of the company they have built forever. They may choose to sell the company at some point to do something else or retire and pass the company along to a successor. For this to occur smoothly, small business owners need a succession plan.
Why A Succession Plan Is Needed
Almost 60% of small business owners do not have a succession plan in place. They either enjoy running the business too much to think about passing it on or feel that day is too far in the future. However, this can be a huge mistake.
Even small business owners who do not plan to retire for a long time should consider a succession plan. This is because unforeseen circumstances could always happen. The owner could die or their situation could change in a way that makes holding onto the business impossible. Retirement planning should begin early, and selling a small business can provide the income the owner will need in retirement. All of these are very good reasons why a succession plan should be in place before it is needed.
What A Succession Plan Entails
Succession plans should be in writing and consider both the financial aspects of the transition as well as the human resources and branding considerations. Legal professionals should be consulted when drafting this plan in writing to ensure everything is in place and will hold up to any legal scrutiny that could arise over ownership at a later date.
Owners should also consult their families, their children, and their employees to see how they feel about any plans being considered. It is just as likely that a successor will be chosen from within the company as it is that the company will be sold to an outside new owner. Most owners want to keep the small business in the family, which is another common outcome. Whatever is decided, consider the feelings of others.
No matter how far away retirement or stepping down from leading a small business may seem, it is important to begin preparing for that eventuality as soon as possible. This will ensure that a solid plan is in place before the transition is due to happen. Small business owners should take the necessary steps to secure the future of their finances, their employees and the future of the company they have worked so hard to build when they are ready to step down.