Succession Planning is for More than Just Estates
If you are an entrepreneur, it is inevitable that at some point you will leave your company. Whether you choose to retire and pass the business on to a named successor or sell it to a new owner, you should think about how you can complete the transition with minimal disruption to everyone involved. Developing a succession plan early on can reduce the negative impact that the conversion process might have on employees and customers.
However, some entrepreneurs ignore the issue of exit planning when formulating their initial business plans. They sometimes create a succession plan as part of their estate plan, but it’s meant to protect them in the event of their death or if they unexpectedly stop working for the company.
But what if you decide to sell your business?
You Need a Preplanned Process to Guarantee a Smooth Transition of Leadership.
Your business’s succession plan describes how you will transfer control of the business when you leave. After all, when business ownership changes, continuity is important for your employees, customers, and business partners.
Here’s What you Should Include in a Succession Plan
Ultimately, a succession plan provides a strategy for keeping a business going during the transition when there is an increased likelihood of losing assets, customers, or employees. Your succession plan should include the following:
Make A Backup Plan: Detail how you will back up and protect your company’s data, applications, and infrastructure during the transition.
Get a Business Valuation: Both you and the buyer must know the value of the business and must select a fixed dollar amount to represent that value.
Employee Assessment: Identify your key employees and analyze how transfers will affect their position in the company and what might happen if they leave the company. When doing this analysis, focus on their roles, because employee names can change over time.
Perform a Facility Review: Assesses the health of the business and include a relocation plan if all or part of the facility becomes unavailable.
Asses your Processes: Identify core and non-core business processes and analyze how they support the business. Buyers can use this operational information as they begin to implement their own business changes and new ideas.
Make a Timeline: Set deadlines for each step of the transition and be transparent with employees to avoid surprises. Include a plan for when to let employees know how their positions can change.
Organize your Standard Operating Procedures: New owners should receive a copy of your company’s standard operating procedures (SOPs) to help familiarize them with how the company operates and the processes that are currently in place.
You can add to this list or remove items that do not fit your business model. A successful plan must reflect and support normal operations, not a one-size-fits-all solution.
How Early in the Process Should You Begin Succession Planning?
It’s never too early to start succession planning. You will not own your business forever, so you might as well be in control of where you want it to go once you are gone. Remember that your succession plan can and should change over time. For this reason, you may find it helpful to periodically review your succession plan and adjust it as necessary to ensure that it still reflects the needs of the business.
When the time comes to move on, you will be more confident and comfortable with the changeover and the people you leave behind will genuinely appreciate your forethought.
Are you a business owner planning to sell your business and need help with an exit strategy and valuation? Perhaps you are considering buying a business and would like guidance with your acquisition. Either way, Murphy Business Brokers in Colorado can help you find a company that suits your needs or can transition your business to the next entrepreneur. We have more than 25 years of experience in buying and selling businesses and service all of Colorado including Fort Collins, Windsor, Timnath, Loveland, & the Greater Denver Metro Area. Contact Murphy Business Brokers now for a free consultation at (720) 292-1627.