Starting and growing a small business usually requires a tremendous amount of time, money and effort. Still, most small business owners do not have a succession plan. It takes time to create a meaningful plan. If you have been putting off writing one for your organization, today is a great time to start.
A business succession plan memorializes the financial, legal and business decisions you make about your company’s future. If you are unable to run the venture because of death, disability, retirement or another reason, your business succession plan outlines what happens to the company. Here are three excellent reasons to begin succession planning as soon as possible.
- Protect your business venture
You have worked hard to turn your business venture into an American success story. Accordingly, your small business likely has significant value to you. It may also have substantial value on the open market. Either way, to protect your investment, you should have a succession plan. The plan can also help prevent tax consequences from depleting company resources.
- Prepare your company for the ownership transfer
Because of leadership styles, personalities and personal relationships, businesses often experience some struggles during leadership changes. A business succession plan helps smooth the transition. That is, you can use provisions in the plan to help your organization prepare. Additionally, by starting the planning process early, you have an opportunity to identify and train your successor.
- Find the right financing
You have a valuable ownership interest in your small business. If you intend to pass your company to an insider, he or she may lack the funds to buy out your ownership interest. By creating a succession plan, though, you provide an opportunity for your successor to secure financing. If financing is not an issue, your succession plan may address how and when your successor buys out your interest or provides capital to the company.