Business Succession Planning: Preparing for the Future Leaders
If you have started and grown a small business, you may have wondered what the future of the business looks like when you are no longer involved. We refer to this as “succession planning.” Succession planning deals with passing on the knowledge, skill, management and ownership to future leaders of your business.
Over the course of decades, and after significant investment of time, capital, and hard work, family businesses may grow to encompass the majority of a family’s wealth and may be the primary source of income for the family. As a result, when small business owners approach retirement age and begin to consider business succession planning, they are confronted with many difficult decisions: When should I exit the business? How should I do it? Who should take it over?
For some, the future plans of their business may involve children or grandchildren. For others, those future leaders may be employees that have proven themselves. And for some, those future plans entail selling the business to a future buyer when they reach retirement age.
If you have a small family-owned business and are unsure how to even begin the process of succession planning, you are not alone. For many business owners, planning for a time when they are no longer involved is an overwhelming task. The attorneys at Sprouse Shrader Smith meet regularly with business owners to help figure out the right path for them.
Business succession planning is also important for younger business owners who are hopefully decades away from retirement. If you fit into that description, ask yourself this – What happens if I get in a car wreck or have some other unforeseen event that leaves me unable to manage my business? Is there documentation in place that allows someone else I’ve named to step in and have the authority to operate the business? Or will the operations be at a standstill because no one has authority?
If you plan to keep the business intact for future generations, it is also important to note that many business succession strategies may become less efficient as a business owner ages and the value of the business increases. Accordingly, any small business owner considering the transfer of his or her business should begin the planning process as early as possible.
Whether the future leaders of your business are five years away from stepping in or twenty years, we encourage you to meet with an attorney to help you choose what that next step looks like for you, and what you should be doing or considering now to help you get there.
