Business owners often plan for a lot of different situations that might come up. There is one very important plan that they might not ever think about putting into place until it is too late -- a succession plan, which can be part of an estate plan. Anyone who owns a business needs to get this done as soon as possible or else there is a chance that the company and employees will suffer if something happens to the owner.
It is all too easy to become wrapped up in the daily decisions that come with running a business, but neglecting this single point could mean that all your hard work is for naught. If something happens to you and you don't have a succession plan in place, you might not be able to pass the company down to anyone and you might be hard-pressed to find a buyer.
When you think about the succession plan, you need to make sure that you take six points into account.
- Goals for the business
- Name of the successor
- Plan for management to help with the transition
- Divvy up ownership with names, percentages and roles
- Plan when and how the transition will occur
- Include all financial matters like buyouts and tax considerations
Many business owners say that they know who is going to take over when they are unable to keep up with the duties. Interestingly, only half have taken the time to write a succession plan. Only around 25 percent have discussed the plan with the person who they want to take over, according to the MassMutual 2018 Business Owners Perspectives Study.
You never know when you are going to be unable to run the business you've worked hard to grow. Putting a business succession plan into writing today can help you to protect the business and the employees who count on it for an income.