For owners of closely held businesses, this task often is a case of “too little, too late.” If you own a business that you hope will continue in operation after you retire, then succession planning is something you have to think about earlier, rather than later.
Whether you are considering having a family member take over, are planning on transferring responsibilities to a key employee or planning on selling it outright to a stranger, it can take 3-5 years of planning and implementation to execute a successful transition. Depending on the circumstances and type of business, it might take even longer.
So Where Do You Start?
You need to give serious consideration to what you want to achieve, what your ideal timeframe is, and what the key elements in the decision-making process are. For instance:
- Is it important for you to keep your business in the family?
- Do you want to gradually ease yourself out of daily operations or work full time until you retire?
- What are you planning to do after you retire, and what impact does that have on the succession planning?
- Is a family member or key employee a viable choice as successor?
- How solid is the business financially?
- Do you want to have an ownership interest after you leave?
- Will you have difficulty relinquishing day to day control?
- How comfortable are you with the idea of working with your successor?
- When do you want to be out of the business?
These are just samples of the type of questions you’ll need to address. In addition, there are a host of other considerations, such as tax consequences, legal issues, business valuation, successor qualifications, estate planning, choice of advisors, etc.
You’ve built a successful business – protect it by putting the necessary time into planning for its future without you. And don’t make the rookie mistake of assuming your successor actually wants to succeed you.