Business succession planning begins well before you’re ready to trust your business in someone else’s hands. Whether you plan to have a son or daughter take over the business, a key stakeholder, or a predecessor, learn the basics of succession planning with the following financial insights from Focus Financial.
Why Is Succession Planning Important for Your Business?
A business succession plan is a plan that outlines the ownership and management transitions in the event of your retirement, disability, or death. It’s an essential plan for any size business, but the urgency and complexity are much lower for new businesses or small ventures.
As with estate planning, a good succession plan will ensure a smooth transition for everyone involved. After you leave, it should be clear who is now in charge of running the company, who owns the business, and who is getting paid by the business.
Ideally, succession planning avoids any drama between employees or between family members, and it gives your employees peace of mind, knowing they will be taken care of in the event of your departure.
Who Is Business Succession Planning For?
To begin, it’s easier to look at the business from an outside perspective and think about what your plans are for it once you retire or pass away. Ask yourself:
- What are my goals for the business?
- Do I want it to run as usual under new leadership, or should it be sold?
- Is there a buyer in place?
Those are worthwhile questions, and they should serve as your starting point. As you go deeper into planning, though, there are three groups of people to take into consideration:
- Your Family
- Your Employees
And there are several questions to consider in terms of each group:
- Yourself: You’ve built this business and watched it grow. If you retire or leave the daily operations of the business, will you continue drawing a paycheck? Alternatively, if you pass away, what does the rest of your estate plan look like, and how will that affect the business in any way (i.e., through estate taxes)?
- Your Family: If you pass away, will your spouse stay on the payroll? Will your children inherit any ownership of the business?
- Your Employees: Are there key employees who you’d like to run the business? Are there strategies to retain clients without your involvement so that the business can operate as usual?
As you think through all these questions, it may start to feel overwhelming. There are many important documents to draw up and finalize once you’ve made these decisions. Therefore, it’s important to reach out to a financial advisor to help get everything in order.
Need Help with Succession Planning? Focus Financial Can Help!
For experience, guidance, and ongoing support for your company’s succession planning needs, contact Focus Financial. We’ve helped many business owners create, develop, and executive effective succession plans that help keep their business, and its future profitability, on the right path.
Trust us to be your partner and professional advocate for your company’s success. Find an advisor near you!