Whether it’s a family owned business or a company that you have purchased, you need to be prepared for the process of succession planning shortly after you buy it. It might seem counter-intuitive to think so far into the future when you have only just obtained the company.
However, there are four critical steps that you need to articulate now. The truth is that no one can really predict exactly when they will exit the business. It may be your concept that you will exit when you are near retirement and may pass it on to a future generation. However, if you don’t have any children or other family members who are interested in stepping in or if a sudden disability raises questions about succession much earlier, you will need to be prepared by having had a conversation with a business succession planning lawyer.
Articulating the crucial agreements and documents in place well in advance gives you options. The four major tips that can enable you with the process of business succession planning include:
- Starting early, because too many business owners put these important decisions off until the last minute and this does not account for the unpredictability of life.
- Choose a successor. You need to evaluate whether the person you choose to step into your shoes is interested and willing to do so.
- Establish value. Make sure you establish the value for your share of the business or the business overall by consulting with a business appraiser or a CPA.
- Use a formalized working agreement. A working agreement can make a business transfer much simpler and the succession process should be clarified so that it can be activated immediately in the event of a sudden decision to exit the company.