Don’t Be a Business Owner That Avoids a Business Succession Plan
If you are a business owner, you know how easy it is to get caught up in day-to-day operations. With so many things happening on a daily basis that impact on the Succession Plan of your business, it can be difficult to take the proper steps for the future of the business.
Whether the business is young or has been in your family for generations, proactively designing a succession plan is crucial for the long-term success and growth of the organization. Failing to create a business succession plan can have serious consequences down the line for you, your employees, and your family.
Before you implement a business succession plan it is crucial to understand the goals and nuances behind it. Understanding why you may be avoiding the decision, the importance of a business succession plan, and some of the options you have available can all help you create a business succession plan that makes sense and is right for your situation.
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Why Some Business Owners Avoid a Succession Plan
As a business owner you understand all the hard work it took to get your business where it is today. Being a business owner can offer numerous rewards both financially and psychologically. Failing to plan the succession of your business in the case of crisis or retirement can be costly to a small business.
There are a variety of reasons many business owners do not have a well thought out succession plan. With such a daunting task, some business owners simply do not know where to begin. Without knowledge on how to implement a robust business succession plan, many business owners will avoid the task as long as possible.
Furthermore, some business owners believe they will outlive the business, or they will never retire from their duties within the business. It should go without saying that this notion is unrealistic in an unpredictable world.
Busy business owners can sometimes feel they do not have the right personnel around them to make a well-designed business succession plan. Without the right resources and information, business owners believe they do not have the time to allocate to create a business plan.
Similarly, business owners feel they have plenty of time to figure out a succession plan before they retire or exit the business. Rather than pushing off such an important task, you, as a business owner, should be proactive in the design and implementation of a robust succession plan.
The Importance of a Business Succession Plan
Business succession planning is the process of identifying and developing new leaders within your business to take on more leadership roles when the time comes for you to retire or explore different options.
A well-designed business succession plan can ensure that your business will continue to grow and thrive even after you have stepped down from your duties. Oftentimes a successful transition includes planning from the early stages of the organization.
The longer you wait to design a succession plan, the less likely the transition will be a success. Additionally, the longer you wait to design your succession plan leaves you with less options when it comes time to make the transition.
Without a business succession plan your business may be vulnerable to a variety of issues. This could include disputes over ownership, loss of key clientele or customers, loss of key employees, and, in the worst-case scenario, the business may fail. Leaving your family members or other stakeholders scrambling to put pieces together after you have exited the business is time-consuming and distracting to the business’s mission.
In addition, the value of the business can be hindered without a clear plan in place for the future. Employees feeling uncertain about both the future of the business and their own future will lower workforce morale and decrease overall productivity.
Factors to Consider When Creating a Succession Plan
A business succession plan involves many factors and variables to consider when designing and implementing. You will want to be aware of the nuance of the plan because of its importance within the business.
Maximizing the dexterity and value of the business in the future should be at top of mind. Whether you plan to transition the business to a family member, business partner, or third party, an all-encompassing plan can assist in achieving the most beneficial valuation for your business.
If you are exiting the business to retire, establishing financial security to maintain your lifestyle in retirement should also be considered. To do this, you should identify your financial needs for a given year or the remainder of your life to determine what you will need to live comfortably in retirement.
In the event of an unforeseen tragedy like disability or premature death, a succession plan can help establish a path for a family member to access liquidity from the value of the business.
You should also be cognizant of the tax burden you will take on from the transition. Estate taxes and other costs can be a hefty price to pay to transfer the business to someone else. Beneficiaries may be cornered into a premature sale to address those taxes, making it crucial to be aware of the liabilities present when the time comes.
If you have spent your entire life making decisions for your business, it can be difficult to give up the reigns. Consider your ability to retain control of the business. A business succession plan allows you to plan and control the outcome and processes associated with the transition.
Next Steps to Take
A business succession plan is as crucial to the future of a business as their day-to-day processes and goals. It can be easy at times to put off tasks you feel you do not have the time for or are not pertinent at this very moment.
The future is unpredictable, but you can establish a plan that gives you control over how your business is transferred to new ownership. The last thing you want is for your efforts to go to waste. That’s why Fragasso Financial Advisors, a Pittsburgh wealth management firm, has recently published a blog post about business succession planning.
Whether you’re a business owner or a high-level executive, it’s important to have a plan in place to safeguard your life’s work. As the saying goes, failing to plan is planning to fail – and this is especially true when it comes to your future and that of your loved ones. So, take the time to read Fragasso Financial Advisors’ informative post, and start protecting everything you’ve worked so hard to achieve.
Investment advice offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.