How to Create a Successful Succession Plan for Your Business

By Marc Stern | Executive VP

Succession planning is a key part of ensuring a business continues operating when there are significant changes in ownership or management. The information below will help guide you on how to approach and execute a successful succession plan.

8 Tips to Help Ensure an Orderly Transition for Your Business

1. Have a frank discussion with the potential successors about taking over the business. Make sure they want to do it. If you have no successors interested in continuing the business, you may want to consider selling the business. If a sale is contemplated, consider appointing a qualified third-party to appraise the business and assist in its sale.
2. Get advice from your attorney and accounting professional. They can advise you on the legal and tax implications for you and business successors.
3. Find out what your business is worth. This goes hand in hand with #2, but a good owner will always have a handle in what their business is worth.
4. Put together a succession plan. Timing the succession is often critical and does not have to come after an owner passes away. In fact if done properly it will take place during the owner’s lifetime.
5. Businesses must integrate senior management that respects older senior executives and properly develops younger ones. The plan must provide a clear path for the older and younger generations to work effectively together and have an orderly transition at the proper time. In other words, synergy is very important.
6. Identity the people who are key to the succession and the skills they have. You may find that you’ll need to go outside the company to hire someone with skills that no one in the company currently has.
7. Don’t rush the plan. It may take several editions before you and the management team agree on it.
8. Make sure the timing of the plan is acceptable to all involved.

Succession planning may not only include passing the ownership to heirs. There are other ways to do this including selling your interest to partners, outside parties or even to an employee or group of employees.

A succession plan is an investment in the company’s future. It should be thought out carefully and discussed with the major company executives, financial advisors and your attorney.  If done correctly, a successful succession will ensure an orderly transition of authority and responsibility while maintaining the continuity of the business for the future.