Business Coaching for Succession Planning
Entrepreneurs invest considerable time, effort and personal resources into making their business a success. But one thing they often overlook is creating a plan for the long-term future of their business.
According to a Nationwide Insurance survey, three out of five small business owners don’t have a plan for what to do with their business when they are ready to retire. The majority of entrepreneurs simply don’t think it’s necessary. Others don’t know when to start or who to turn to for help in developing a plan.
Unexpected life events can happen any time. Planning for succession is a necessity.
Whether you are nearing retirement age or just starting out, you should take time now to put a succession plan in place to protect the longevity and financial future of your business.
In simple terms, succession planning is the process of passing control of a business to others. It involves creating a comprehensive strategic plan for someone to either own or run your business when you retire, become disabled, or die unexpectedly.
Your business succession plan is a unique and dynamic document that should evolve with your business. It serves as a roadmap to guide you in managing the issues of transition in order to:
Maximize the return of the retiring owner’s investment
Minimize the tax burden at transfer
Increase the chances for the survival of the business
It’s never too early to put a plan in place.
Planning for both the success and the succession of your business should be an integral component of your strategic planning process – and it’s never too early to start. Making arrangements early gives you more time to foster professional development among your successors, minimize issues that might result from your departure, and ensure a smooth transition.
Working with an experienced advisor is essential to creating the right business succession plan for you, your team and your family.
I partner with clients to help them determine the ideal successor to take over the business. Then we create the appropriate transition plan or Buy/Sell Agreement, which typically provides for business valuation, life insurance and successorship.
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Here are three key questions to consider before you begin the succession planning process:
If you die unexpectedly, can your family continue to run your business? If your family cannot run your business, who can? And if your family needs to hire your successor, how will they fund replacing you
How do you protect your family in the event of your early death? You need a mechanism to ensure that your family is treated fairly by your partners or successor. The most effective form of protection is a buy/sell agreement.
How good is my buy/sell agreement? Does your buy/sell agreement indicate which events trigger the requirement that the remaining owners purchase the interest of the departing shareholder? Does it detail the formula for business valuation? Does it discuss how the buyout will be funded?
A business coach who specializes in succession planning will help ensure that you set a fair price for your business – and put a solid plan in place to make a smooth transition.