It is natural for business owners to want to manage the companies they built from the ground up. As a result, they often procrastinate on creating a business succession plan, which helps a company prepare for a change in ownership. The following four tips can make succession planning a much smoother process – even for the most headstrong business owner.
1. Define the Goals of the Succession
Before starting a succession plan, business owners must clearly identify the goals and priorities of the succession. These priorities may include financial security, sustained employment for current team members, and retaining local ownership (instead of merging with a larger company).
2. Discuss Business Succession Plans with Potential Successors
While some entrepreneurs hope that their children or family members will want to inherit their businesses, others dream of a larger company buying their companies. As great as they may be, neither of these scenarios is guaranteed. Thus, business owners should discuss succession plans with those who they would like to have a say in the company’s future. It is much easier for owners to plan a transition if they know who will – or will not – be involved.
3. Plan Efficient Financial and Tax Terms
The idea of giving a company away after investing blood, sweat, and tears into it may appall some business owners. However, there are significant tax advantages to transitioning a business. Owners should work with their CPAs and business advisors in determining the best tax minimizing strategies for the succession plan.
4. Frequently Review and Update the Plan
Business owners should review the succession plan at least semi-annually to ensure that they have accounted for changes in their personal lives, business models, employees, competitive landscapes, and economic situations. Additionally, the succession plan should clearly outline the client and vendor communications procedures in the event of a sudden change.
The Bottom Line: CRI Can Help You Create Your Business Succession Plan
Business succession planning is critical to your company’s long-term success. Implementing the four tips in this article should help you approach succession planning with greater proactivity. If you need assistance creating your business succession plan, contact CRI’s CPAs and advisors today.