An effective business succession plan spells out the leadership transition process step by step, covering everything from the qualities you expect in a successor to how and when the transition will occur. Unfortunately, many family business owners put off planning until the last minute or neglect to develop an effective exit strategy altogether. To ensure your business transition is a smooth one, here are four things you should be sure not to do:
1. Put off ownership decisions. To help you determine who will take the reins, create a list of qualifications your ideal successor should possess. Knowing what education, skills, and experience you desire in your heir apparent will help you decide whether a family member or employee is qualified (or can develop the qualifications) to take over the business or, if you will need to recruit an outsider.
2. Postpone developing a transition plan. Start developing a succession plan at least 10 years before you intend to retire. But don’t wait until retirement age to start. Nothing spells “disaster” faster than a quick succession that is necessary because the owner became sick or died unexpectedly. Planning now will ensure you have the time needed to adequately train your successor.
3. Inadequately prepare your successor. Providing opportunities for professional development, cross training and mentoring are essential for your successor to take over. Keep in mind that your next-in-line may have the operational knowledge to effectively run the business, but he or she may lack the “softer” skills, such as conflict resolution and communication, needed to lead.
4. Fail to address transferring ownership. If one or more family members will take the reins, you need to decide whether to transfer your ownership interests during your life or at death or sell your interests. Postponing this decision could adversely affect your ability to live comfortably in retirement.
If you would like to discuss the impact of this information on your business, please contact the experts listed below at PYA, (800) 270-9629.
