What is Succession Planning? Succession Planning is the act of creating a plan to determine the future of your business, should an owner or key employee retire, become disabled, or die.
Why is this Necessary? Have you considered the impact of your business on the community in which it exists? What about the employees of the business or the individuals that depend on you, your products or your services. If your business closed tomorrow, under any eventuality, what would happen next? Not only does succession planning address these questions, but it also involves other key components that can provide benefit to you and those you serve:
- Wealth building. If you choose to transfer ownership of your business, wouldn't it be of benefit to ensure that it be of the highest valuation when this happens? Maximizing the value in your business will ensure you get the greatest reward for your years of hard work.
- Who is your successor? Do you intend to pass the keys over to a family member? a key employee? a new owner through the sale of the business? There are different methods and needs for either type of successor.
- Keeping it in the family? If you have a family member that will be taking-over, it would be wise to look at the estate planning process. There are different taxes that need to be considered when looking at a family transition.
- New owner training. Usually, the process involves more than just swapping a check for a set of keys. Steps should be taken to on-board the new ownership and set them up for success.
- Succession structure. Will the transition to new ownership involve a direct sale of the business or a lease/rent to own...? Will the current staff and management be required to remain with the business after transition or will they be displaced. Understanding and formalizing the details at an earlier stage will make the transition easier.
Who can help me? There are a number of entities that can help you plan. PCED is happy to help you get the ball rolling. We also strongly suggest that you contact the Small Business Development Center as they have a Certified Exit Planning Advisor (CEPA) on hand to work with you on the intricacies of the transition, and to guide you as you work with your CPA, attorney, bank, suppliers and any other relevant parties that could be a source of assistance.