The success of your business is no doubt due largely to your efforts, but what happens to it when you are no longer there? Taking time to plan for the future can help assure that your business lives on after you move on.
5 steps to successful succession
Succession planning doesn’t have to be complicated, but it does require some deliberation. Here are five steps to help clarify your goals and action steps to reach them:
1. Determine your timeline. How much longer do you expect to manage your business? Another 10 years? Two years? Your timeline will help define your strategy.
2. Consider successor alternatives. Is someone in your family interested in and qualified to run the business? Are there expectations, unrealistic or otherwise that must be managed? For example, if your oldest child expects to take over but a younger child has demonstrated more drive, talent and experience, you may need to have some frank discussions. If no one in your family is qualified or wants to run the business, start thinking of alternatives. You may want to groom a current employee or hire from the outside.
3. Develop a written plan. This plan should include a timeline and action steps, as well as an appraisal of your business. Depending on whether you expect the business to remain in family control or not, you may want to explore options such as trusts, employee stock
ownership plans, buy-sell agreements or an outright sale.
4. Mentor your successor. If you expect a family member or existing employee to take over, start grooming him or her while you are still actively running the business. This will give your successor valuable experience as well as get employees accustomed to an eventual
shift in leadership.
5. Have a contingency plan. Even if you expect to be at the helm of your business for decades, illness, injury, death or personal factors could sideline your intentions. Is there someone who knows (and cares) enough about the business to step in immediately? Have you considered key person insurance that would compensate the company for losses incurred during a period of disruption caused by your death or disability? Do you have a power of attorney in place, authorizing a trusted individual to make company decisions on your behalf if you cannot?
Using a team approach
Developing a solid succession plan for your business may involve business banking experts, appraisers, attorneys, and trust and estate professionals, all working with you to create an integrated strategy that considers all the angles. If you need to put a succession plan in place or you’d like an objective review of your current plan, contact a business banking expert at (800) 544-0545.
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