Succession planning? What’s that?
Business succession planning is a series of logistical and financial decisions about who will take over your business upon retirement, death or disability.
Small business owners – because they are human – are notorious for not having a succession plan. “It’s too soon to worry about that”, I’m only 40, I’m not going anywhere!”, “My family can decide after I’m gone”. Real head in the sand thinking and a great way for the business you worked so hard to start and grow to wind up belonging to someone else at no profit for those you left behind.
In fact, 58% of small business owners have no succession plan, according to a study of 200 privately held businesses by Wilmington Trust.
If you don't have a succession plan your death or inability to continue running the business could put your heirs in a tough spot. Succession planning isn't just about control and ownership. There also may be tax issues, training concerns, or finding a viable exit strategy if there's no relative or current employee willing (and able) to take over. ( Daniel Kline in an article for The Motley Fool) Honestly, is this something you and your family needs to be worrying about when you can no longer run your business – for whatever reason?
The best way to control what happens to your business -- in many cases your life's work -- is to take the proper steps to execute your plan. Even if what you want may anger your family or employees, it's always better to handle it now when it can be discussed than to leave it for lawyers after you're gone.
There are many options: select a successor and train them as the company grows and changes is the best. Then at the appropriate time, you can slide gracefully out of the owners chair and into your golf cart with no problems. The other option used by many is to sell your business to someone else. This will take a great deal of due diligence on your part – but in the end can be a fine solution.
Life can come at you fast, and the future can become the present in an instant. Bottom line: If you own a business and haven't built out your succession plan yet, it's time to get started.
Here’s another reason for succession planning: you’ve just closed a deal for supplying a jillion of your widgets to a big manufacturing company. The contract will last three years – the really big manufacturing company wants to know if your business will still be around in three years – or at least still functioning. They have the right to ask you if you have a succession plan. Won’t you look smart if you already have one?
A great starting place for information about succession planning is the Small Business Administration. They have a training module named Selling a Small Business and Succession Planning. The cool thing about this training module is that you can download and then use the Participant’s Workbook as your guide – or at least a starting place, because at some time you will also need a lawyer.
Here’s where to find the SBA guide: https://www.sba.gov/sites/default/files/files/PARTICIPANT_GUIDE_SELLING_SUCCESSION_PLANNING.pdf
Googling “succession planning checklists” will get you plenty of information. One of the better checklists I found is https://www.cibcwg.com/c/document_library, and the document you want is CIBC BUSINESS TRANSITION PLANNING CLIENT CHECKLIST.
When you talk to your family or employees about succession planning, they will all immediately tell you that you’re a long way from needing to think about it. However, in their secret heart of hearts – they worry about how they will carry on if you are not in the picture. Having a succession plan in place will give everyone peace of mind.