Business succession planning is closely related to estate planning. Many people consider it because they are passing a family business onto the next generation. They can certainly see the benefits for their immediate family members of having a clear, well-defined plan in place.
But it’s also important to think about the business side. A succession plan should be crafted to benefit the company, as well. Here are some examples of how it can do so.
Stable operations
To start with, when the succession happens, a plan provides stability for the business. You can limit disruptions and focus on continuous workflow moving forward. It also decreases the amount of time it takes to replace people at key positions, so the business can continue operating just as it was.
Higher retention rates
In some cases, an effective business succession plan will also result in higher employee retention rates. This can also lead to higher performance and assist with the stability noted above. The new owners can just focus on running the business, not having to replace numerous employees.
Defining roles
One clear focus of a succession plan should be to define which roles are being assigned to which individuals – if multiple people are involved. For instance, many family businesses are passed to multiple adult children. Are they all going to share ownership? Who makes financial decisions? Who is in charge? Having clearly defined roles helps the business operate smoothly and reduces the odds of a dispute.
Are you doing business succession planning this year? Be sure you carefully take the time to look into the necessary legal steps.
