One important aspect of running a business that not enough business owners plan for is business succession. This means planning ahead for changes in ownership of the business in the event the owner becomes incapacitated or dies. In an ideal world, business owners would include plans for succession in their estate plans. However, this does not always happen. Here are some of our best tips for successful business succession planning.
The first step is to have an idea of what you want to happen with the company, should you become incapacitated or die. It sounds awful, but there are some important questions to ask yourself. The answers to those questions help determine what the best succession plan is for your company.
- Do you intend to sell the company before you die?
- Do you want your heirs to inherit and run the company?
- Will your spouse or children have a continued need for business income after you pass?
- Should more than one heir assume ownership of the company? If so, should they receive equal shares in the company?
- Should the transition take place upon your death or sooner?
Determine Succession Candidates
If your family are not the ones assuming control of the company, then you will need to determine which of your employees should take the reins upon your death. While the “heir apparent” may be the next in line in the organizational structure, it is important not to overlook other less senior employees who may have the necessary skills to take the company into the future. It is also important to have conversations with these people to determine what their overall career goals may be. Some people that you have identified as potential candidates may have no interest in running a company, so this would necessarily exclude them from line of succession.
Once potential candidates have been identified, one of the best things you can do for the future of your company is to increase the amount of professional development that these candidates are involved in. This can be beneficial in giving them extra knowledge and skills that can help the company to thrive after the succession plan unfolds. You may even want to stage a trial run of the succession plan at some point to see how these candidates handle the managerial responsibilities while you take a vacation. This can also be a great way to identify what further training and development may be needed.
Consider Your Succession Plan When Hiring
Just because you have a succession plan in place does not mean that it cannot change. When hiring, be sure to consider any talent gaps that may be left behind when the succession plan rolls out. You will want to make sure to backfill any position that may open up or to continue searching for the best candidate to replace yourself should the need arise.