How Creating a Succession Plan Shapes the Future of Your Business
Creating a succession plan for your small business can be the difference between leaving a smooth transition and closing your doors. While it may seem unlikely that anything will happen to you, planning for it anyway can reduce stress on both sides. If you were hit by a bus tomorrow, would your business survive? Do you have a successor lined up?
[Determine whether your business could pass the “hit-by-a-bus” test.]
Transitioning Your Business
According to the Small Business Association (SBA), in around 10-15 years, approximately 70% of privately-owned businesses will exchange hands, creating the largest intergenerational transfer of wealth in U.S. history. Preparing to transfer a business is a big job. Business owners must consider potential buyers, whether that be a trusted employee or family member. Perhaps there is a company interested in merging or acquiring your business where you’ll need to negotiate the sale. Throughout the process, business owners will also need to utilize resources to consult on the business succession. Attorneys and accountants are just a few of the people you could reach out to during this pivotal time that will help you define your goals and vision for your succession plan.
SCORE is the nation’s largest network of volunteer, expert business mentors and resource partner of SBA. According to SCORE, a good succession plan can assist with: transferring ownership when the time comes, maintaining your lifestyle in retirement, providing for your heirs financially and preparing the business to handle unexpected events.
Once you’ve decided to create a succession plan, next you’ll need to decide how to exit your business. From there, you’ll want to figure out the value of your business (assets, earning value, market value) and how the transition would go. It’s important to review your plan on a regular basis. Circumstances can continually change over time and you’ll want your plan to be as up-to-date as possible in the event of unforeseen event. To help you prepare for changes in your business, the Succession Planning Checklist will come in handy.
Learn more about succession planning.
Discover more about The Partnership’s tools to help Greater Des Moines (DSM) startups and small businesses develop and grow their ventures with The Partnership’s Small Business Resources.