One of the reasons people start a family business is to create a legacy for future generations. However, much of that legacy depends on how well you plan for your company’s continuation after you are gone.
You don’t want your hard work to die with you, which is why succession planning is so important.
What is a succession plan?
A succession plan is a strategy that ensures a smooth leadership transition in a business. It states who will take over the business if the current leader retires, becomes incapacitated or passes away.
While many people may associate a succession plan with large corporations, they are particularly important for family businesses due to the following:
- It assures vendors, customers and employees that the business will continue even if the owner is no longer there.
- It can prevent family conflicts by outlining clear roles, responsibilities and processes for transition.
- The successor can begin preparing for the role through mentorships and increased responsibilities.
- It can help ensure the business continues to carry out its mission into the future.
Every company’s succession plan will look different based on their industry and needs, but they all should include the following:
- Identifying potential successors
- Creating a training plan for the successor(s)
- A timeline for transition
While you may not plan to retire in the near future, you should start creating a succession plan as soon as possible. That will allow you time to choose and train someone for the company’s leadership. Furthermore, there may be legal and financial issues you may need to consider.
Making your succession plan part of an overall estate plan will ensure the future security of both your family and your business.