You need to have three clear phases to the business succession planning process to ensure that you have considered all aspects and are as prepared as possible to pass your business on to a future generation.
Phase One: Creating A Clear Vision
Setting up measurable goals within your succession plan and aligning them with company values are important. This can have critical implications for the success of your company now and going into the future. Make sure that you are preserving not just the financial health of the company, but also its reputation and principles. These determine the many different issues in your own life including estate and tax planning strategies, financial issues, retirement and transition concerns. Make sure that you use a strong team of advisors who is familiar with business succession planning to accomplish these goals. After all of the data about the current state of your business and where you’d like it to go have been assembled, you can begin to create a strategy.
Phase Two: Building Your Management Team
Tapping into the talent already existing within your business goes beyond simply thinking about whether you should pass on the business to a child.
Many businesses do no survive with family succession plans especially if you have not talked to your child about taking ownership of the business because he or she might not be interested in the manner that you expect. Building a senior team that helps you to manage all the critical areas of your business will empower this next level to take over the company by working in a supervisory rule first. Your business succession plan should have methods to guarantee that valued employees will stay on their position upon your death, disability or retirement. An employment agreement can clarify this.
Phase Three: Put Together Your Estate Plan
Any succession plan is not complete without an estate plan. One of the primary concerns might be how to treat all of your children equally in the succession process, particularly if you have non-business assets. Make sure that you talk through your choices and consider using tools such as a shareholder agreement or buy/sell agreement with any other business owners.