A crucial aspect of long-term business planning that many entrepreneurs tend to overlook is succession planning. Usually, small business owners are so focused on running their business’s day-to-day operations that they fail to think about who should take on their business when they are gone.
At the same time, many entrepreneurs simply neglect succession planning because the day they retire still seems so far away. Unfortunately, many businesses fail because they are not prepared for what the future holds. In fact, 70% of family businesses fail because of failure to properly train a successor. So, how exactly do you start the process of succession planning for your small business?
Here are a ways you can get started:
- Identify a successor as soon as possible: If you have a candidate in mind, you should create a training and development plan to ensure they are equipped to lead your business down the road.
- Distribute your property: After you leave, be it by design or circumstance, you will need to mention in your plan how your business interests are to be divided. Will the wealth pass on to your family, or be reinvested into your business?
- Discuss any outstanding debts and taxes: If you have any unfinished business, you should clarify how it is to be dealt with in your succession plan. Leave clear instructions as to how your business should pay for fees or taxes they might incur after you leave.
- Talk to a lawyer: It’s crucial that you discuss your plans with a lawyer to make sure your documents adhere to state and federal regulations; otherwise, your succession plan may little to no weight in determining how your business will be passed on.
To learn more about the ins and outs of succession planning, check out Bestow’s infographic below: