Building a company from the ground up is something you remain proud of, but what becomes of your business if something happens to you? Planning for an unpleasant future may not leave you with a warm and fuzzy feeling, but ensuring your business remains on course should.
Creating a succession plan is something you should not put off. Preparing your employees, investors and loved ones for the possibility of a worst-case scenario is one way you can continue to chart a course for them even if you are no longer at the helm.
What is the premise behind a succession plan?
What is the plan for your business should you become unable to run it? A succession plan acts as an estate plan of sorts for your company. It kicks in upon your death, disability or retirement and serves as a framework to establish how the company continues to function in your absence. An effective plan should include:
- A timeline for when certain events occur
- A collection of operating procedures and documents
- A plan for who is to succeed you
- A current business valuation
- A comprehensive financial portfolio of company money
How do you choose who does what?
The primary purpose of a succession plan is to establish who takes over your ownership interest in your business. The way you formed the company may determine how this occurs, but you still have the right to decide what happens to your share. When formulating a plan, you should consider whether you want to pass things along to a family member or heir, appoint someone within the business to succeed you or sell your shares to another inside or outside the company.
Doing your part to continue a legacy you have built may prove long-lasting for your workforce and family.