Business succession planning refers to a series of financial and logistic decisions that you make regarding who takes over your business when you pass away, retire or become incapacitated.
When you run a family business, succession is never that simple. You have to account for a lot of things when you transition from one generation to the next, and this gets even more complicated when you find multiple successors raring to take over the leadership of the company that you painstakingly set up.
Dimensions in Business Succession
Many complex scenarios arise when you have to pass the mantle over to someone else. However, you have to put in mind various things when it comes to succession planning for your estate:
Tensions arise between the successors who desire for things to stay the way they are and those that have a knack for things to work out differently.
It is vital that you distribute the operational responsibilities and set expectations so that every successor has the ability to thrive in his area of specialization – whether it is getting a new way to run things or maintaining the existing operational stability.
Truth be told, you won’t allocate similar responsibilities to every successor. You need to assess the various successors and come up with a plan so that you allocate equity to each successor depending on their value.
This is the glue that holds a company together. Now that you have introduced new members to the company, the next thing is for you to make sure they are plugged into the communication channel for things to run smoothly.
It might seem messy at the beginning, but the fact that you have more than one successor is a good idea. With proper preparation, you will find that you have a robust team that can take the company to greater heights.
Reasons to Have a Business Succession Plan in Place
According to All Strategy, family businesses comprise more than 80 percent of all firms globally. This is why the legacy needs to be maintained.
Let us look at the top reasons why you need to have a detailed business succession plan in place, telling your family and beneficiaries what happens when your business is no longer under your control.
- The Plan Allows you to Avoid Conflict
Many businesses have lost track of their goals due to the conflicts that revolve around leadership and decision-making. When you have a plan in place, you help your successors avoid any conflict that may arise when you are gone.
Coming up with this plan early in advance means you will have a longstanding culture of better solutions that will last even when your business changes hands. Having the plan right from the start is the best way to set up the business for long term success.
- You Get to Train Them
Having a succession plan in place doesn’t mean that you hand over the mantle right away. Instead, you create the space that allows you to give up your control gradually.
You get to create a timeline for your eventual retirement that allows you to show the successor how to do things in the business. When you have a plan on time, you end up with a strategy that works for all of you, which ensures long-term success for the business after you hand it over to a successor.
- Selling the Business Isn’t Your Best Bet
Some people plan to sell off the business when they think of a succession. But this might not be the best option for you and your family. For one, finding a buyer that will give you value for your money isn’t that easy. Just because you valued your business that much doesn’t mean that everyone else will do the same.
So, succession planning might not be the best plan for your business in certain circumstances, but it can save you from the challenge of trying to get a buyer.
- It Helps you Transition Smoothly from Your Business
Many business owners find it hard letting go of a business that they have struggled to keep afloat over many years. However, having a succession plan at hand is ideal when you have to let go of the reigns, even when you aren’t planning to give up company control any soon.
For instance, when an unexpected health issue comes up and you need to relinquish your leadership position in the company, you won’t have the time to optimize its value. The end result is that you leave the family grappling with a huge tax bill.
- The Plan Allows you to Avoid Conflict