How to leave a successful business footprint

Most business owners know they need a written business succession plan but in reality very few have taken the time to develop one.

Whether you decide to sell your business to retire, to get out of the business to try something else, or be forced out due to health reasons, it’s important that you plan for that day… whenever it may come.

By having a plan in place, you ensure future business decisions reflect your vision and desires, rather than someone else’s.

If your business is to continue when you are no longer there, it is crucial that you consider questions such as:

  • Who will run the business and make the big decisions in your absence?
  • Will the new owner/manager appreciate the real value of the business and be able to learn from your experiences?
  • Will your employees be retained by the business and otherwise be looked after?
  • Will your key clients or suppliers want to do business on the same terms with the new owner/manager?
  • Will your family be looked after, especially in the event of your death?

Business succession planning is a process that should enable you to address all of the above issues… and more.

The steps to a successful business transition

The nature of the transition will help to determine the preparatory steps. Of course, the timing of some events such as death and disability cannot be planned for, and consequently they have some unique requirements, including buy/sell agreements and life insurance contracts.

On the other hand, if you are planning to leave the business to retire or take up a new venture, it will benefit everyone concerned by considering the following steps:

  1. Prepare a senior employee to eventually take over the running of the business, or bring someone new into the business for this purpose.
  2. Ensure your business records clearly show how well your business is doing and the methods you have employed to achieve this.
  3. Review your employees’ contracts to ensure they are protected in the event of a new owner taking over.
  4. Keep your clients and suppliers informed of your plans; introduce them to the new business owner and provide a transition phase to test that they can work together while you are still around.

When should this planning begin?

Too often business owners wait until the last minute when important windows, including the potential un-insurability of a principal or key employee, have closed.

Once the business has survived the start-up stage, the owner should consider planning for death and disability outcomes. Otherwise, it may be suitable to consider this transition several years prior to your exit. How long would it take to bring a senior employee up to speed with your business operations? How long would your clients and suppliers need to build trust and confidence in their new business partner?

You’ve worked hard to create a successful business. A good succession plan enables a smooth transition with less likelihood of disruption to operations. By planning your exit well in advance you can maximise the value of your business and enable it to meet its future needs.

A range of professionals may need to be involved in setting up your succession plan, including your financial adviser, lawyer and accountant. Even if you already have a plan in place, it’s a good idea to review the agreements and your insurance policies regularly, to make sure they are up-to-date and reflect the current value of the business.