Are you prepared for the worst-case scenario? It’s not something any of us like to think about, yet us business owners die and get sick too. We may also end up having to sell our business. Having a succession plan in place makes it nice and clear who gets what and what they must do. Writing one isn’t that hard and involves mostly two actions: transfer of assets and transfer of control. Let’s walk it through …

What is a Succession Plan?

A succession plan is like a will. You don’t have to die for it to come into play though. It tells someone else what assets are in your business and how to operate the business. It’s not hard to create, yet 66% of business owners don’t have one. Are you one of them?

It’s a written document which you can prepare yourself or hire a professional to do for you. Lawyers, accountants and business brokers are the kinds of people you’d need to speak to if you go down this track.

Why Should I Write a Succession Plan?

You’ve put thousands of hours of work into building up your business. There is no way you’d want to see all that effort go to waste. Advantages for having a plan are:

• Your ‘legacy’ will live on!
• To provide for a smoother transition between owners
• Allows time for thorough training of new staff and owners
• Reduces arguments between the old and new owners
• Your business may fail if no one knows what to do and you are not there to tell them!

There are plenty of excuses business owners give for not having a plan. Being too busy, having other priorities or even having no idea they even need one are just some of the common reasons. If you don’t have one, isn’t it time to consider beginning the succession planning process?

Entering the Succession Planning Arena

There are two main areas you’ll need to cover in your plan.

1. Asset Transfer – get your business valued because to transfer your assets, you need to know how much they are worth first. Often small business owners have a blurred line between personal and business assets, so make sure you’ve sorted these out first. The aim is to have a lot of assets moving on with the business. This gives the new owners the good running start and you a nice price for your business (if you are selling).
2. Control Transfer – if you are leaving your business to family, you can either sell or gift it to them. If you have organised this in advance, both of you will be able to benefit from the ‘grooming’ of the new owner and the passing on of knowledge from the old.

A great transition is one which is planned. It’s carefully thought out and everyone knows what is happening. Having a plan makes sure that things go the way you want. After all, no one wants to see your business heading down the toilet because there was no forward succession planning! Unless they are your competition, of course ….