As an entrepreneur, you probably have plenty of business concerns on your mind, from maintaining a positive cash flow to scaling your company up. One thing that you may not be thinking about, though, is coming up with a succession plan. Far too many small business owners procrastinate on this very important task, often because they are years from retirement and assume that they can come up with a succession plan later. However, a succession plan that can be implemented in the event of retirement, disability, or death is a must no matter how old you are and how long you hope to run your own business. Writing a succession plan now is the best way to ensure that your wishes for your business are carried out if anything unexpected happens to you.
Here are just a few of the reasons why you should create a formal succession plan for your business.
You can’t predict the future, and you need to be prepared for any eventuality. You’ve hopefully already done some risk management planning for your business (for example, you may have purchased business interruption insurance) to contend with potential worse-case scenarios. Planning for your succession is no different—there’s no way that you can predict your own future, and as unpleasant as it may be to think about suddenly dying or becoming disabled, you need to be prepared so that your business can stay afloat if the worst happens.
Reduce the likelihood of family strife. If you run a family business and several members of your family are already involved in its management, there may be multiple people who want—and think they deserve to—take over the business once you step down. Alternatively, you may have family members who want to own shares in your business after you’re gone, but have no interest in actually running the business. Coming up with a succession gives you an opportunity to sit down with your family members—or another heir apparent—and talk about who is best-suited for what role. There will hopefully be less conflict when your family understands your wishes for the business rather than having to guess at them.
Give yourself the peace of mind of knowing who your heir will be. If you have a child, you might assume that you can just leave the business to him or her. However, if you don’t have kids, or if your children aren’t interested in or suited to running your business, coming up with a succession plan will give you an opportunity to think about who would be the best person to take over for you—and to talk to that person about eventually stepping into your shoes.
Keep your business going even after you’re gone. You’ve worked hard to get your business to where it is today, and you don’t want all your hard work to be undone if you suddenly become incapable of running it or pass away. Make sure that your legacy lives on by having a plan in place.
If you are unsure how to start working on a succession plan, or if you have questions about a more complicated succession plan (for example, if you and your spouse co-own a business) contact an experienced estate planning attorney. An estate planning attorney who has helped previous clients with succession plans will be able to advise you as to how best to protect your business.
About the Author:
Christopher Q. Wintter is the founder of Wintter & Associates, P.A. and a board-certified expert in Trust and Estate matters by the Florida Bar. With more than 24 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers for 2011, 2012 and 2014 in Estate and Trust Litigation.