Business Succession Planning Checklist
Business succession is a major dilemma that can cause a small family business to go under in the event that the owner dies. The problem is that without the vision or expertise of the owner, many businesses simply fail. While death is one issue that needs to be planned for accordingly, so is retirement and disability. Through the use of a business succession planning checklist, it will be possible for current businesses to have better control in the event that they are no longer able to work.
Who Will Take Over?
If an owner retires or dies, who will be the next person in charge? This needs to be formulated carefully to ensure that the person that will be in charge is up to the task. With business succession, the two most prominent options are: a current employee that knows the operation well will take over, or training will be provided to the successor. In either case, there has to be a firm understanding of who will take over in the absence of the current owner. If future problems arise, can the past owner offer some form of consulting?
Establish Goals and Objectives
There needs to be a plan put in place so that when succession occurs, it goes smoothly. This plan will outline the basic goals and objectives of the company. Furthermore, a person retiring should outline their goals as well so that they can successfully retire at an age that is acceptable. If death occurs, there also needs to be a clear outline of what the duty of the stakeholders will be. Through objectives and goals, a business’ operations may also be discussed so that successors can fully understand business operations.
A business succession planning checklist must also include the business’ current valuation. This will be the basic market value of the business as well as what assets it currently has. This is something that will be determined through assets, profits and inventory. If a family business is taken over, it may be sold if the current owners simply do not want to run the business any longer. Perhaps retirement can only occur if the business is sold. This all needs to be considered.
Every checklist must include an exit strategy that will allow the business to be taken over or transferred. This strategy will also have to include a general timeline that will be utilized so that exiting can be done in an efficient manner. All current owners or part owners must be made aware of the exit strategy that has been put into place.
When the business is transferred or sold, tax issues will need to be addressed. This can be taken care of proactively so that there is never an issue with taxes that may affect retirement benefits. Furthermore, the property that a business is located on will need to be addressed as well. Will the future owner be taking over the property or will it be rented to them? Every last bit of planning needs to address these issues so that future issues do not arise.
Larger businesses that have stock holders will need to be dealt with accordingly. If a person has a majority stake, will this be divided up upon their death or will be transferred to a family member. If this member is younger, when will they have a say in the business’ operations? There are a lot of questions that need to be addressed with larger businesses and legal issues may arise. The best option for businesses with multiple owners is to consult with a legal advisor that can iron-out all of the fine details for a business.
Succession planning can be altered with major changes in a person’s life. Perhaps a former spouse was listed as the successor, but this is no longer warranted. Every year, the plan needs to be revisited to ensure that when it does go into effect, everything is in order. This will also have to do with the business’ current valuation price as the price of a business will fluctuate greatly from one year to the next.
Business succession is a matter that must be dealt with while an owner is in good health. The moment a business becomes viable, it is up to the owner to put a plan into action that will ensure that all of their hard work will be able to last even when they have departed from the company. If a person was to die or become unable to fill the role that they maintain in a business, there must be a plan that will allow for new personnel to take over their duties. A business succession planning checklist is the first step to ensuring that there is never an issue when you leave your business.