Business succession planning is a strategy used by business owners to help protect their business from failing after they leave the business. It is a strategy employed to ensure that the business continues to run smoothly, and successors have a plan of what to do if an owner suddenly leaves the business.
Any size or type of business can take advantage of creating a business succession plan. The following are some of the benefits to implementing one.
- Hope: It can give others hope that they, too, can one day be an owner of the business. This increases motivation to be a better employee and work harder to potentially achieve that goal.
- Risks: It can mitigate the risks that are associated with an organizational change within a business. This is because with a plan there is little room for mistakes to be made by a new owner.
- Opportunities: It leads to more developmental opportunities and better training for new and existing employees. If new training protocols are added as a part of the business succession plan, then the business could run more efficiently if those protocols are put in place immediately.
- Goals: An owner can clearly define the goals they have for their business and put said goals in motion. Setting goals, not only for employees but also for the business, will help the business grow and solidify that all employees are on the same page.
- Planning: Forecasting for the future allows for a much smoother transition if something were to suddenly happen to an owner. Planning gives employees more peace of mind for their job security if an owner can no longer run the business.
- Communication: Open communication is key with a business succession plan. For it to be an easy transition in the future, the owner needs to know how employees are responding to the current plan. Any feedback given by employees should be considered when updates are made to the plan.
- Structure: It gives more structure to the company. This structure can result in less of a mess to deal with when choosing a new owner to pass the business down to in the future.
By creating a formal plan there is less opportunity for an employee to take a position that the owner did not intend.
Also, consider the entire workforce when choosing successors, an employee does not have to currently have a leadership position to become an owner.
Promoting from within is usually better than bringing in an outsider to run the business when an owner is no longer able to run the business. Most people respond better to someone they know, rather than an outside individual. A knowledgeable business attorney can guide you through the process of creating a business succession plan, making it as detailed as an owner would like it to be.
Stephen J. Lacey, JD, LLM, is a member of the law firm Lacey Lyons Rezanka. His practice areas focus on estate planning and probate.
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