Succession Planning Isn’t Only for Estates

At some point in time, you’re going to leave your business. Whether you choose to retire and pass the company to a chosen successor or sell it to a new owner, you must consider how you complete the transition of power with minimal disruption. Having a succession plan in place can minimize the negative effects of the transition on your employees and customers.

Yet, some entrepreneurs skip the topic of succession when putting together their business plans. They may create one as part of their estate plan, but that’s designed to cover them if they retire or unexpectedly stop working for the company.

What happens if you decide to sell the business?

You Need a System To Ensure a Smooth Transition of Leadership

Your company’s succession plan details how you will transfer control of the company. In the end, change is inevitable when the business changes hands, but continuity is important for your employees, customers, and business partners.

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What To Include in a Succession Plan

Ultimately, a succession plan provides a strategy for keeping the business running during the transition period when it’s more likely to lose customers or employees. Your succession plan should include the following:

  • Back-up plans: Detail how you will back up and secure the company’s data, applications, and infrastructure during the transition period.
  • Business valuation: You and the buyer need to know what the business is worth, and you have to establish a set dollar amount to represent that value.
  • Employee assessment: Identify your key employees and analyze how the transfer will affect their roles within the company and what might happen if they leave their positions. Stay focused on their roles as you complete this analysis because employee names may change over time.
  • Facilities review: Evaluate the conditions of the business facilities. Include a plan to shift operations if all or part of the facilities become unusable.
  • Operations assessment: Identify the company’s essential and nonessential operations and analyze how they support the business. The buyer may use this information as they begin implementing their changes in the company.
  • Timeline: Set deadlines for each step in the transition, and be transparent with employees so that there are no surprises. Include a plan for when to tell employees about how their roles may change.
  • Standard operating procedures: The new owners should receive a copy of your company’s standard operating procedures (SOP) to help them become familiar with how the business operates.

You may add to this list or eliminate items that don’t fit your business model. The succession plan should reflect and support regular operations and will not be a one-size-fits-all solution.

How Soon Should You Create a Plan?

It’s never too soon to start putting together a succession plan. You cannot own your company forever, so you may as well have control over how you want to walk away. Keep in mind that your succession plan can—and probably should—change over time. For this reason, you may find it beneficial to review your succession plan regularly and adjust it as needed to ensure it still reflects the needs of the business.

When you’re ready to sell, remember that you don’t have to do it alone. You know what makes your business tick. Partner with someone who understands the process of selling your business to a new owner. Contact us today to learn more ab