Tip of the Week: How to Set Up a Business Succession Plan
If something debilitating were to happen to you, could your business carry on? This isn’t a pleasant scenario to think about, but it’s absolutely necessary to have a contingency plan in place for reasons like this. Also known as a business succession plan, if you have a plan in place, then you don’t have to worry about what the future holds, at least, for your business.
Currently, you might feel like you’re at the top of your game and in control of your destiny, but you know deep down that everything can change in a most-unfortunate instant. If you’ve put off implementing a business succession plan, then you’re not alone. According to a 2014 survey from U.S. Trust Insights on Wealth and Worth, 66 percent of business owners haven’t recorded a business succession plan, or even considered one.
This particular survey targeted 680 business owners with a high net worth, having assets that total millions of dollars. With so much at stake, one would assume that these business owners would have their act together and be prepared for the worst. However, for the majority of well-to-do business owners, this just isn't the case.
Here are more interesting statistics from the survey that provide insight as to why this may be:
- 87 percent of high net worth business owners started their business themselves, while 13 percent inherited it.
- 87 percent don’t expect their children to keep the business running when the end is nigh.
- Two-thirds don’t have a succession plan set up. By age 50 or older, that percentage increases to 70 percent.
- Entrepreneurs with financial advisors are twice as likely to have a succession plan as those who don’t.
- Make clear accommodations for a family-run business. If you’ve got a business that’s run by your family, and you would like it to stay that way, then you need to specify this in your business continuity plan. Specifically, you will want to look into a familial management system.
- Looking outside the family for support. If you have to look outside the family to find leadership that will keep your business going, then a good place to start is with your current employees who know what it takes to run your company. Or, consider capable business partners who have an active interest in your company.
- Be sure to make clear records of your plan. For whoever you select to take the helms of your business, if something were to happen to you, you need to have your plans clearly recorded somewhere that can easily be found. This will make the transition easy and prevent a whole lot of drama.
- Get a lawyer involved. For such a complicated matter as this, and with so much at stake, it’s best to get a lawyer to draft your business succession plan. Getting a professional involved will ensure that your plan will be airtight.