If you’re a small business owner, you may have had a conversation with a loved one about business succession planning. Your loved one asks you if you’ve thought about your plan for the business and business succession. You make a joke that you don’t plan on going anywhere any time soon. If you’re one of the many small business owners who has had this conversation, you’re not alone.
There are lots of reasons that small business and family-owned business owners don’t like to talk about business succession planning. Maybe you think it’s too far off in the future. Maybe you’ve put your life’s work into your business and talking about succession is just too painful. There are lots of great reasons that you should have a business succession plan. Here are our top eight:
1. Unexpected life events can happen at any age
Major life events can happen to you or a loved one at any age. No matter how much you plan for the future, you just never know what might happen tomorrow.
Creating a business succession plan can protect you if you or a loved one has a life event that leaves you unable to tend to your business. Succession planning before you need it puts you in the driver’s seat. You don’t have to worry about an event that leaves you unable to control your business’ destiny. Instead, you’re prepared for any possibility.
2. Your business can continue smooth operation
When you have a business succession plan, you’re able to ensure that your business doesn’t have any hiccups during the transition. As part of your planning, you gather financial records, valuation data, inventory and even client lists. Even information for day-to-day operations can be critical to gather in order to keep your business running smoothly in the future.
For example, passwords, bank account information and even IT information can all be critical to prevent business disruptions in the future. Succession planning helps you think of all of these details as part of the planning process.
3. Business succession planning ensures a fair transition on your terms
You can get a better deal as you exit your business if you have time to plan. With business succession planning, you can use buy-sell agreements to establish prices, purchase terms, the value of each share and even who can purchase an ownership interest in the business. It can take time to find a buyer willing to pay. Planning ahead gives you time to consider how much retirement income you need and what your goals are in retirement.
4. You ensure the right people inherit your business
Your business is personal. It may be your life’s work. Pre-planning for business succession gives you time to step back and think about who you want to inherit your business.
If you expect family members to take over, it’s important to start having those conversations now. You should speak with family members in depth about their commitment and their goals for the business. Your loved ones may have different interests and priorities. They may need the training to run the business successfully.
The sooner you have these tough conversations, the more time you have to ensure that the right person takes over and continues to make your business thrive.
5. There’s time to make a deal
A successful business deal takes time to negotiate. Even if an option looks great, when you start to iron out the details, the deal can fall through. It may take several tries to get the right deal in place.
Business succession planning gives you time to try again if the first plan doesn’t work out. It gives you time to explore contingencies and make sure that you’re getting a fair deal and fair terms for your business.
6. Due diligence can help you get a better deal
When you start to look at the details of your business, there may be things that potential buyers don’t find flattering. There might be changes to make, issues to address and things to put in order in order to make your business more attractive to potential buyers.
Starting your business succession plan now gives you time to make adjustments to ensure that you get every dollar that you need and deserve when it’s time for retirement.
7. Planning can minimize tax burdens
Planning for business succession now can help you avoid surprising and burdensome taxes on down the road. A professional business and estate planning attorney can help you look at business succession planning as part of an overall estate planning strategy.
There are things that you can do now that can reduce your tax burden later on, as well as things that you can do that make the transition logistically easier when it’s time to transfer ownership of the business.
Thoughtful planning can make things so much easier on down the road. Qualified legal advice can help ensure that you look at all the important considerations in your planning.
8. You have peace of mind that you’re leaving a legacy
Your business is your life’s work. You want to leave it in the right hands and look back on it with pride. Business succession planning at any stage gives you the peace of mind to know that your business is in good hands. In addition, succession planning helps the ones that depend on you also have the confidence to know that their future is in good hands.
Business succession planning
Business succession planning doesn’t mean announcing a retirement date. Instead, it means taking steps to protect you and your loved ones as well as establishing an exit strategy that’s on your terms and for a fair price when the day comes.
Taking steps for business succession planning now can keep you in control and protect your family. Our experienced team can make business succession planning a key part of your overall retirement and estate planning strategy.