There are many things to worry about when running a successful business. What will happen when you retire does not need to be one of them. Through thoughtful and proactive business succession planning, you can ensure that your professional legacy lives on even after you hang up your boots.
Why Make Business Succession Planning A Priority?
Many successful business owners have gotten to where they are by carefully controlling their company’s variables and minimizing the risk of surprises. However, even the most careful CEO cannot predict his or her own future. Death, disability, or an unplanned retirement of an executive or owner can wreak havoc on a business. At best, an unplanned departure will cause months of personnel changes and operational disruption. At worst, it could send the company out of business.
Proactive business succession planning minimizes that disruption and allows your company to live on, even after you step away. It lays out in advance the who, what, where, when, and how to transition your business to the next generation of leadership.
What Does A Business Succession Plan Look Like?
At its most basic, a business succession plan outlines how ownership and management of a company is passed between shareholders when one person leaves the business. In this sense, business succession planning is much like estate planning for corporate interests.
However, a thorough business succession plan goes beyond inheritance. Even highly invested executives want to be able to retire and watch their company thrive on its own. To that end, a business succession plan will include options for owners to buy out the financial interest of a partner who is no longer able, or willing, to continue with the company.
However, it should not end there. A comprehensive business succession plan goes beyond the finances and addresses delegation of duties and responsibilities after a corporate executive leaves the company. Depending on the role of the retiring professional, and the size of the company, a business succession plan may include:
- Job descriptions and identities of likely interim and permanent replacements.
- How passwords, online accounts, trade secrets, and other confidential information will be stored by executives and accessed by their successors.
- How the transition will be announced and addressed in the public
- Who will notify contractors, vendors, and other related entities of the transition.
- What training or support the incoming professional may need to step into the role.
- The degree to which the retiring executive will be available to assist in transition.
Since a business succession plan is written in advance, it will necessarily be contingent on the circumstances of the event. For example, if a partner dies unexpectedly, any plan that includes that partner training his successor will obviously not occur. There should be alternative options to address multiple possibilities.
When Should You Start Planning Your Business Exit Strategy?
Ideally, a business succession plan starts from the very beginning: the partnership agreement or shareholder agreement. This contract outlines the business interests of the various members involved in the company and should include provisions about what happens when those members leave, voluntarily or involuntarily.
Similarly, business succession planning that addresses unexpected emergencies cannot be started too soon. There is no way to predict when a medical emergency will take away key talent and leave the business stranded.
However, at a certain point, retirement becomes a more practical reality. As business owners approach later life, they are well advised to plan their exit strategy. In the five to ten years leading up to retirement, executives should work with skilled business succession planning attorneys, financial planners, and other professionals, to put the pieces in place. This could include:
- Recruiting, training, and grooming successors from within the company
- Formalizing company policies and practices to ensure continuity through the transition
- Preparing the company’s finances to facilitate the partner’s buy-out or retirement package
Business succession planning is not just for family businesses. It is an essential part of any company’s corporate plan. Don’t wait until an emergency leaves your leadership in a panic. Take proactive steps now to ensure that your company can be profitable even when you aren’t there day-to-day.
Contact Experienced Bloomfield Hills Business Attorneys Today
The Cronin Law Firm has experienced attorneys to aid with whatever legal issue you’re facing. If you are planning for your company’s future or to protect your family business after you are gone, contact The Cronin Law Firm today to schedule a consultation.