Why Every Business Needs a Written Succession Plan
Having invested so much time and energy into a business endeavor, many entrepreneurs do not want to consider what will happen if they are no longer able to run their company. Additionally, it may be difficult to decide if a business should stay in operation without its founder at the wheel. A business succession plan is one of the many ways a savvy business owner can be prepared and organized for what is to come.
In Case of Untimely Death or Departure
Unexpected events are unfortunately common. However, a personal or financial crisis is likely to have a much larger impact on a business with no succession plan. If you have long-term business goals, you may secure the legacy of your business with someone you trust to make the right decisions in your absence. Alternatively, a proper succession plan can ensure that a business is dissolved or sold in an efficient, painless manner.
While there may be parties invested in keeping your business afloat, a family business may also cause your loved ones undue strain if your family members are working toward different goals. There is a possibility that your family will reap a higher reward from the dissolution of your company, or by transitioning company leadership to a non-family member. These decisions are unique to you and your business, which highlights the importance of having a clear, definite course of action in the event of your untimely absence.
Keep Employees and Partners in the Loop
With everyone on the same page, your business has an added layer of protection and integrity that will survive your departure. A business succession plan will make it easier to spot possible hurdles, allowing you and your team to iron out any future rough patches that may arise.
Choosing a successor
Business succession may require that you withdraw from exercising control over your company, but it also allows you to do so on your own terms. What are the qualities you would like to remain present in your business model? Now is the perfect time to discuss the subsequent direction of your business.
Formalizing your wishes is important to business succession planning. A Buy-Sell Agreement, for example, is a document that outlines the terms of ownership transfer or withdrawal from a business. This is highly advisable in a business partnership, or when considering having a third party purchase your business from you.
Prepare Customers, Associates, and Loved Ones for Transition
Periods of transition are notorious for causing stress and confusion, but this does not have to be the case for your business. You have the ability to plan ahead for certain circumstances, such as sudden incapacitation or medical emergencies, which can cause panic among loved ones and business associates alike.
An Advance Directive is an estate planning tool that can be applied to business. In it, you have the opportunity to voice medical decisions and preferences as well as appoint an agent to act on your behalf in regard to treatment preferences. Having a clear course of action in case of medical emergencies will make it much easier for your business to remain stable.
Similar to an Advance Directive, a Power of Attorney names a personal representative to act on your behalf if you become incapacitated, but it applies to non-medical matters. This is crucial to a business changeover. Compared to the time and energy it would take others to decide how to handle a business you have left behind, creating a Power of Attorney and an Advance Directive will take a relatively small amount of effort. When a business continues to run smoothly in your absence, customers and clients will also rest assured that they are in good hands.