THUNDER BAY – Business – Have you been putting off business succession planning for your business? If the answer is yes, you’re not alone. Many small business owners don’t have a business succession plan in place leaving them unprepared for retirement, disability or death.
Do I need a plan?
You’re probably asking, do I need a business succession plan? Most, if not all small businesses do. That is because many of these businesses are succeeded by a family member or family friend. When you’re building or running a business, thoughts of selling it or passing it to others is often far from your mind.
However, that day will eventually arrive, and as in all business matters, the earlier you plan the more successful it will be. Business succession planning is really an extension of your personal estate planning with a focus on the future operations of your business.
Having the right plan can help you determine how your business will be transferred to the successor and will help outline the steps necessary to prepare for the transition. A good succession plan ensures that your wishes will be carried out if you should pass away suddenly, or are unable to continue to run your business. A successful plan can also help you ease into retirement or provide you with a retirement income.
Planning for unforeseen events
Thinking about succession planning often requires some tough questions. Who will take over the business? What assets does the business have, and who will receive them? How much control over the business do you want to retain when you retire? Where will the money come from to fund your retirement? How will your family retain their standard of living when you pass away? How will you ensure your business continues to run smoothly?
Every business and personal planning situation is different. Every business succession plan is also different. Taking the time to answer these questions will you guide you to the right plan, and allow you to visualize what your goal will be.
Identify the key steps
Assess your current situation: You will need to determine the potential profitability of your business if you were no longer there to run it. You will also need to consider the steps that would be required to maintain profitability.
Understand your goals for your business and your family: Is your goal to have your family member continue to own and manage your business or perhaps it is to have your family own the business with outside management assistance? You may wish to sell your business to key employees, or it may better suit you to sell parts of your business.
Identify and prioritize action plans: Business owners would be advised to work with a professional advisor to determine what must be completed in order for your business succession plan to proceed and succeed.
Select the best action plan: Using the help of a financial security advisor and from the various alternatives considered, select a plan that best meets your established objectives.
Document your decisions: Put your business succession plan in writing and forward it to your professional advisors to review, adjust then file for safe keeping.
Implement your plan: It is likely that many parts of your plan will not be implemented for many years. However, some items may require immediate attention such as insurance coverage to fund a buy-sell agreement, training of a child successor in key business areas, introducing the successor to key suppliers and contacts, and updating wills and business purchase agreements.
The Bottom Line
Successful business succession planning requires preparing ahead, even when it doesn’t seem necessary. Just as you prepared and planned when you started your business, the same work and preparation is needed when you need to plan for your business’ future.
Anthony M. Talarico
Financial Security Advisor
W: 807.343.4788 ext. 248 C: 807.472.6092