Deciding to move on from your business can be a very emotional decision – you naturally have a strong personal attachment, and you want to see the business continue in the same successful fashion.
Having a formalized succession plan, developed in partnership with your professional advisors, can help you work through the strong feelings, put the business first, and create the path to a smooth transition.
A well-designed succession plan will help:
- Protect the value of the business
- Transfer of ownership will be more controlled
- Potentially increase the sale price
- Ensure the business keeps running smoothly through the transition
- Ensure the future financial stability and value of your business
- Preserve the values and culture of your business
- Protect the legacy of the business
- Reduce the potential tax liabilities of transferring the ownership
- Ensure you meet your financial goals
- Plan – retirement, another business, vacations etc.
- Set a timetable for transfer of ownership to your successor, whether a family member, employee, or an outside purchaser
- Ensures continuity of operations
- Maintains relationships with suppliers, customers, etc.
- Contribute to the growth of the business in terms of market share, profitability, and size
- Prevent the business from losing momentum, or market share, during the transition
- Provide stability for your employees
- Identify and prepare for possible disruptions, such as loss of key employees
- Maintain operational efficiency, by ensuring a smooth handover of responsibilities
- Create contingency plans, and establish clear roles and responsibilities
One of the major risks of not having a clear succession plan is the loss of continuity and stability, which can very quickly lead to the downfall of your business.
Other risks include:
- Delay in making critical decisions, or making bad decisions
- Power struggles between employees who want to take over, or move up in the company
- Losing institutional knowledge
- Ineffectual and/or rushed training of successors
- Reduces the value of the business
- Buyers/investors will be less willing to invest if the business doesn’t have a plan for stability
- Negative impact on reputation of business
- Creating anxiety and uncertainty among employees, impacting morale and productivity
Planning for succession can be complicated, but it is vitally important to ensure a smooth transition and give you peace of mind.
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