Succession planning is something too many small business owners think about too late! Many don’t even think about succession planning because they believe that they will just sell their and that’s the end of it.
However, even with the sale of a business succession planning is critical. The buyer will be your successor instead of a family member or a current manager in your business. So, succession planning is a requirement no matter what your exit strategy!
There are many facets to succession planning. In fact, this is one of the reasons small business owners avoid it.
Planning for your succession is critical to your family and employees. Case in point – the bus scenario! What would happen to your family and employees if you got hit by a bus? Not something most people like to think about, but it’s the elephant in the room.
Understanding Succession Planning From 30,000 Feet
When discussing your succession plan you need to consider a number of different yet related topics including, but not limited to:
- Personal and Business Goals & Objectives
- How Decision Making Gets Done
- Selecting and Training Your Successor
- Owner Estate Planning
- Contingency Plans for Possible Scenarios
- Considering Corporate Structure & Transfer
- Preparing for Business Valuation
- Select Your Exit Strategy
- Execution of Your Succession Plan
The challenge in all of this is that many of these topics are an expertise in and of themselves. Therefore, succession planning is best done with the assistance of a team.
Who Should You Include in the Process?
If you should use a succession planning team, who should be on the team? This can vary by your situation, but it is fairly apparent by the previously described areas that at a minimum you need:
- Accountant CPA
- Financial Planner
- Management consultant
The financial planner is necessary to assist the owner with assuring they understand their financial options in achieving their financial independence via the exit strategy. They will be helpful in looking at various financial scenarios from the owner’s perspective. In most situations this is a good counter-balance for the CPA who should be looking at the transaction from the entity’s or business perspective.
A management consultant is very useful addition. They provide the ability to execute everything the others will say needs to occur with the business to achieve the desired result. Most trusted advisors look at succession planning from the perspective of their discipline . The management consultant will bring that objective balance required to maximize the return on investment of the business’ resources.
How Do I Start My Succession Planning?
You can see this is a pretty complicated process. But, done properly you should be able to step away from your business in 3 – 5 years. The key is keeping an eye toward creating a self-sustainable business.