After years of successfully owning and operating your small business, you might not be able to imagine a life without your days being taken up by your company. If you’re truly lucky, you merged your passions into your entrepreneurial dreams and created something that you enjoy managing. The truth is, though, that one day, you will not be able to be your company’s fearless leader. When you get to that point, you will be immensely grateful that you, years before, began planning for that day.
Why Do I Need a Business Succession Plan?
Even if everything goes according to plan and you retire at the age you aimed for, you need a solid plan for handing off your business. When you started your small business, you were aware that the odds were against your company surviving and succeeding. The odds are even worse for the survival of your business if you become unable to run it and there is no succession plan in place. Besides putting your company on solid footing, you will be able to receive a substantial windfall when you make the decision to hand off your company, allowing you to be financially secure while you live out your golden years.
Advice for Constructing an Effective Succession Plan
- Start early – before your business makes its first dollar. Although the thought of retiring might seem far away when your business is still in startup mode, it is worthwhile to figure out what you want your succession plan to look like. Provisions in your company’s articles of incorporation, partnerships agreement, or operating agreement should address the topic of succession.
- Create processes and procedures that can be followed by your successor. You probably started your business because you were uniquely positioned, through experience and knowledge, to solve a common problem. Having this immense knowledge allowed you to separate yourself from competitors. However, if you want to give your business the best chance of succeeding after you step down, you need to have written procedures in place that make sense and can be duplicated by your successors and other employees.
- Identify and train your successor years before you plan to retire. The target for beginning to look for a successor is at least five years before you plan to actually retire. This could be an employee already working with the company, a colleague who doesn’t currently work for you, a personal mentee, or a family member. Once you have someone in mind, you should begin preparing him or her to take the reins. You should also begin negotiating how you will hand off or sell your interest or equity in the company.
If you are an entrepreneur, it is almost never too early to begin thinking about your business succession plan. The good news is that, as long as you are still working and have mental capacity, it is not too late to get started. There are countless components and considerations that go into an effective business succession plan, which is why you need an experienced attorney who is knowledgeable in both business law and estate planning. Attorney Tanika L. Finney can fulfill those needs; call the office today at 334-203-7521 to discuss your options.