At some point, we’re all faced with the decision to call an end to our careers. But what will happen to your company when you retire, or when illness or injury keeps you from working for an extended period? Having a succession plan in place is key to ensuring the business will go on. Regardless of whether or not you’re close to retirement, it’s a good idea to start planning early. Well-executed succession plans often take months to implement.
One of the best ways to begin building the framework of your succession plan is to determine “what you’ve got.” You know you own a business, but how much is it worth and what are its primary value drivers? To determine these things, engage a qualified valuation expert familiar with the respective industry.
In addition, clearly outline your goals for retirement. That is, do you intend to retire outright or gradually retire by, say, moving to a part-time schedule? Some business owners step down but keep a seat on the board of directors.
Be sure to include all stakeholders. Discuss your succession plan with family members and, if appropriate, key customers or business associates. Give them an opportunity to provide input and listen carefully to what they say.
You’ll also need to choose the best method to transfer ownership of the company, whether through a sale, stock gift, buy-sell agreement, trust or an alternative option. It’s also wise to address retirement and estate planning — how will your succession plan help fund your retirement and provide for your family and/or heirs?
Another important step is revising your business plan to incorporate an eventual ownership succession. A business plan is essentially a baseline for monitoring progress and keeping the company on track. The targets laid out in the plan become performance goals, and regular reviews of the plan help determine whether those goals are being met.
The plan should also define the responsibilities of each executive or participant in the succession plan. Your company’s succession depends on the management team’s ability to understand and carry out the financial and marketing objectives of the business plan.
This includes setting up a program to identify potential successors who are able and willing to take over — whether they be family members, employees or third parties — and to develop their abilities and transfer knowledge to them. Training can include industry certification courses, leadership workshops and business management classes, as well as day-to-day mentoring and job shadowing.
Assemble Your M&A Advisory Team
A solid succession plan will require the input of outside advisors. Your advisory team should include an experienced investment banker or broker, a capable accountant, an M&A focused attorney and possibly a certified valuation expert. Many owners also meet with business consultants or brokers, insurance experts, and estate planning advisors as well. These experts can help you fine-tune your succession plan. When the time comes for you to step down, they can guide you through the execution process.
This is a project that ultimately determines the longevity and prosperity of your business. The earlier you embark on your succession planning, the more successful you will be in this endeavor. For any advisory services relating to succession planning, mergers, or acquisitions, contact VonLehman’s M&A specialists today at firstname.lastname@example.org or 800.887.0437.