Small business owners put their heart, soul, and tears into building up their company; investing time, energy, money, and more into making sure their business makes it day after day, month after month, year after year. What should happen to the business you worked so hard grow and cultivate should you decide to retire—or even choose to move on to a new business venture?
With as much effort as you have put into your business, it is assumed that you would want it to continue to thrive. That’s why it is important to take part in succession planning.
What Is Succession Planning?
Succession planning is the development of a business plan that specifically addresses the future of the company when the current business owner has decided to sell, retire, passes away, or otherwise modifies their leadership role (like turning the company over to become employee-run). This plan is a guideline for those who will taking over the leadership role on how to navigate this change.
Typically, a business succession plan outlines the value of the business and other financial aspects; how to divide and assign responsibility; important contractual agreements between partners, investors, and/or heirs that must continue to be adhered to or must continue through the succession; as well as other important factors that could impact company processes, policies, and overall success of continuing following this major change.
The Benefits Of Early Succession Planning
By investing in creating a succession plan, you can help to ensure your vision for the company you created is continued; that your voice and say over the future of your business is heard. By passing on your knowledge, experience, and planning for the business to continue without you, you help to ensure the transition of your company with you at the forefront can continue to operate smoothly with minimal interruption. In addition, succession planning can help provide you peace of mind that your company is in the hands of those your trust to keep it going.
Succession planning can also help take into account any taxes or expenses related to passing on your business to the next generation ahead of time—minimizing their impact on the company. In many cases, proper succession plan helps reduce panic and concern over what is going to happen to the company—with a plan in place to fill the newly empty leadership role, employees, vendors, customers, investors, and others concerned about the wellbeing of your company won’t stress as much during the transitional period.
When To Develop A Succession Plan
It is never to early to have a plan for your company’s future. As soon as you have a business plan for creating your company, you should know how your company is going to go on without you. Starting a business can be risky but with proper planning and the right insurances to protect what you have built, you can be rest assured of the security of the company you started from scratch.
The information and statements above are intended for educational purposes only and are not intended as specific tax or legal advice. Magruder Agency cannot provide tax or legal advice. You should consult a tax and/or a legal advisor regarding your particular circumstances.