Succession Planning Has To Be Planned!
Well managed businesses plan and budget for sales, expenses, cashflow and growth. At the same time businesses should be planning for, and anticipating, the various changes that do occur in businesses through death, disability or retirement of a key person or any other event that may cause problems within the business.
Research indicates that the vast majority of family owned businesses do not have a formal succession plan in place. Ignoring the consideration of financial arrangements and rearrangements that will be necessary for businesses in the event of the death, disablement or retirement of family members can dramatically affect the value of a business. In the worst case scenario, the business itself could collapse and the family left with immense problems.
Some of the items that can be planned relative to succession planning include:
- Setting up and reviewing plans for changes in leadership.
- Maximizing the value of the business.
- Installation of mentoring so as to ensure that skills are passed on.
- Having informed stakeholders.
- Documenting relationship agreements so that the details are known to successors.
Unfortunately, just as night follows day, retirement and then death, will occur to all business operators. After all the sweat and toil that has gone into establishing a business, some consideration should be given as to what would happen to that business if the current principals or key persons were no longer available. Succession planning is very important and it should start at the very beginning of the life of the business.
If you would like to receive a “What Would Happen If?” questionnaire on succession planning, please contact us.