Starting your business succession plan might feel overwhelming. You’ve poured years of hard work, passion, and dedication into your company, so taking the first step towards transitioning can feel emotional and intimidating. However, having a clear succession plan is one of the best ways to ensure the longevity of your business, preserve your legacy, and maintain the well-being of your people.
Here’s a straightforward guide on where to begin with your business succession planning to help you develop a grounded, thoughtful, and values-centered approach.
1. Clarify Your Vision and Goals
Before diving into the details, take time to reflect on what truly matters to you. Are you most concerned with your business continuing to operate in the same manner? Is financial security your primary goal, or is it more important that family or long-term employees remain involved? Defining these fundamental goals early sets a meaningful foundation for your entire plan.
Need help defining what it is exactly that you’re passing on? Check out this article.
2. Start Early and Plan Thoughtfully
Succession planning is not a last-minute task—it’s a process that is best pursued through careful thought and early action. Begin the discussion with key stakeholders, such as family, employees, and trusted advisors; and do it sooner than you may feel “ready”. Early conversations help reduce stress and provide everyone involved with clarity about future expectations and responsibilities.
3. Identify and Prepare Potential Successors
Whether you’re considering family members, current employees, or external candidates, clearly identifying your ideal potential successors is essential. Evaluate their skills, values, leadership style, and genuine desire to lead. Once you’ve identified possible successors, you can create plans to help them develop any necessary skills and experience over time.
Read more about leading and passing on a business of values.
4. Get a Professional Business Valuation
Understanding your business’s true value is crucial in creating a fair and realistic succession plan. A professional valuation provides clarity about your financial position, enabling you to make informed decisions about structuring the transition and ensuring the longevity of your company. Seek out a trusted referral to a business valuation expert, so you can have confidence in the results.
5. Choose Your Transition Method
Will you gradually transition ownership, or all at once? Will you pursue the complexity of an employee stock ownership plan (ESOP)? Or sell directly to a key employee, pass the business to family, or sell to an external buyer? Each method has unique advantages and challenges. Deciding your options early allows you ample time to navigate any complexities and prepare all parties involved.
6. Develop a Comprehensive Timeline
Establishing a clear timeline ensures everyone involved knows what to expect and when to expect it. Your timeline should include milestones like leadership training, partial equity transfers, or gradual transition of operational control. This clarity helps reduce uncertainty and maintains business stability throughout the process.
7. Create Contingency Plans
Even the most thoughtful succession plans can encounter unexpected challenges. Having contingency plans in place, for scenarios such as health issues, sudden changes in successor availability, or market shifts ensures your business remains protected no matter what.
8. Engage Experienced Advisors
A business succession plan encompasses a range of complex legal, financial, and emotional considerations. Engaging trusted professional advisors experienced in succession planning, such as attorneys, accountants, and financial planners, as well as trusted personal advisors, like mentors or pastors, ensures your decisions align with best practices and your personal values.
At MSB Law, we recognize the importance of a well-planned succession strategy. We are committed to helping business owners like you develop plans that not only secure your business’s future, but also honor your values and legacy. Our approach is always values-driven, focusing on your unique needs and goals.
Ready to start your succession planning journey? Contact MSB Law today to speak with one of our experienced attorneys about how we can help you develop a customized succession plan tailored uniquely to you.