Here are five top concerns every business owner should consider when creating a business succession plan:
Don’t wait until it’s too late
The worst scenario is simply not having a business succession plan in place at all. Not having a plan can affect whether or not employees and vendors get paid, and hinder the business’s ability to even operate, especially if any business loans are being serviced. Family or heirs could be forced to sell the business, potentially at a loss, or lose valuable employees.
Update the plan annually
Businesses evolve and change over time, staffing changes, focus changes, the market changes, and a myriad of other conditions can affect a company. An annual review keeps a succession plan agile enough to adapt to those changes and identify any new challenges or business concerns that might need to be addressed.
Look beyond the C-suite
Many businesses make the mistake of focusing on what happens with executive and C-level employees in creating their succession plans. While smaller businesses may only need to worry about a handful or less employees, larger businesses need to also consider other key positions within the company, such as HR and IT directors, and any employee who has a critical role in how the company operates. Neglecting to have a plan in place for these levels can result in talent loss during a sudden transition.
Stick to the formalities
Smaller businesses, with one or two owners, and just a few employees, may feel that an informal plan will suffice, as everyone pretty much knows the day-to-day operation of the business. However, leaning into an informal approach offers no guarantees when something sudden happens. Business views and motivations can change, or common understandings on key business issues may turn out to be common misunderstandings. The only way to effectively protect the business is with a formal succession plan that’s transparent and shared.
Don’t skip the business valuation
Business valuation is a key part of a succession plan, and often one of the most overlooked steps. It’s easy for a business owner to come up with a number that sounds feasible and run with it. Smaller entities may be able to slide by with this approach, but larger businesses with more complex employee hierarchies need to have a clear understanding of the business value, and valuations should be updated regularly to stay current with the market and business performance.
Don’t go it alone. Talk with an experienced attorney to make sure your business is protected.
The knowledgeable team of experts at Hackstaff, Snow, Atkinson & Griess can advise your business and create a succession strategy that works for you, regardless of how large or small your business is. Contact us today for a free consultation.
