Again, there are so many challenges on transferring a family business, if done properly though, the challenges can be mitigated. The most difficult stage of the process is taking the initiative. In other words, a common question we field is where — and when — should business succession planning begin?
Too often, many business owners wait until the last minute when important options, including the potential uninsurability of a principal or key employee, have closed.
Generally, setting up a successful business succession plan involves six stages:
1. Commitment — The owner must be committed to the concept that the business must continue to create opportunity for those to come. This commitment must be communicated clearly, extensively, and often.
2. Recruitment — Recruiting good people always pays dividends and is a key area of importance in succession planning.
3. Development — Investing time in developing family members, key employees, and management team members, and allowing them to exercise authority and control, will be vital to your success.
4. Selection — Having developed a transition plan and recruited the right people, selecting a successor or successors becomes easier. By empowering a broad range of key people, the selection process is simplified and the owners’ options are enhanced.
5. Announcement — Once a succession plan is in place, the owner should communicate that plan. Such communication gives key management people and/or family successors a clear understanding of the path to the future, as well as any role they may play in that path. It also allows them to begin setting future goals and objectives for themselves.
6. Implementation — In implementing the succession plan, the owner must be ready to step aside and allow the successor(s) to take over. The owner must be prepared to take on new challenges in retirement, knowing that his or her financial future is secure.
Finally, while not one of the six steps, selecting qualified advisors, such as an accountant, attorney, insurance agent and financial planner, can help assure that your plan legally, profitably, and affordably considers your needs and objectives.
If seeing your business continue into the future — without compromising your own retirement needs — is important to you, this last step may be the most important of all.