If you are a small business owner and have not established a succession plan, now is the perfect time to start. You can facilitate the change of ownership of your business by paying particular attention to succession planning. A Prince Edward Island potato producer-only started talking about his retirement at the age of eighty after being diagnosed with dementia. His case is no different from many other small business owners who have not established a succession plan.
By taking action now to establish a succession plan, you can help keep your business running smoothly. When the time comes to pass the torch, adopting a prudent exit strategy will allow you to preserve the value of your business – as well as your legacy. Here are five questions business owners should ask when planning succession for the business.
Why is planning important?
A good plan allows you to maintain good relationships with your employees and business partners, which can be particularly important if your family members are among them. You should also make sure that your business is reliable and has good prospects for the sale price you want.
Succession planning helps you:
- Protect your business legacy
- Ensure the continuity of service in your community
- Adding value to your business
- Ensure the financial security of your family and your partners
- Preparing for the unexpected (illness, accident, death)
- Preparing for the future
A change in management can also cause problems for employees, suppliers, and customers. Ensure your strategy includes a communication plan for your business partners and team members to keep all parties informed during the transition. It is also essential to make sure that the smooth running of your business continues.
When should you start?
If you plan to leave your business in the next five years, you should start planning now. Even if your business is newly established, having a plan allows you to prepare for the unexpected, good business continuity planning. Experts say the transition process can take up to five years and even up to ten years when it is a family business, depending on the organization’s size and complexity.
In a family business case, the relationships and emotions involved can complicate matters since most people are uncomfortable talking about things like age, death, and finances. According to Susan Ward, an experienced business writer and business owner, 70% of businesses don’t survive the transition from founder to the second generation. In most cases, the factor for failure is a tax or family conflict, two things that can be addressed in a good family business succession planning plan.
Who is the ideal candidate to replace you?
Whether you want to transfer your business to a family member, employee, or an external third party, you will need to think about the skills and qualifications that a person will need to acquire to run the business, a process that can take years. Once your successor is chosen, a transition plan will take into account the training he needs.
What support will you need?
You don’t have to fend for yourself. Experts are available to assist you with succession planning. Professionals’ use is essential to small businesses’ success, including transferring to another owner. They offer knowledge and expertise in areas that you may not be familiar with. They can also complement your management team to keep your business running efficiently.
As an entrepreneur, you could benefit from the services offered by four types of professionals:
- Accounting
- Lawyer
- Financial planner
- Financial security advisor
What is your succession plan?
The choice of your successor, your business structure, and the collaboration with one of these specialists will facilitate the transfer of your business. By determining how you will transfer your business – whether, for example, to a family member or through a cash or financing sale – it will be easier to establish a program to follow to make room for the next generation. And with the helpful resources available to you – and many of which are free – the best time to plan for the future is now.
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