Do you have a succession plan in place for your family business?
If you’ve ever seen the hit HBO show Succession, you know that it was filled with family drama!
And while that’s probably (hopefully!) not a real story for you and your family, it does give you an idea of why succession planning is so important for a family business.
Planning as early as possible, and reviewing the plan regularly, will make the transfer of business easier on all family members. Consult with a trusted business lawyer to help you develop a solid succession plan.
Here are a few reasons why a solid succession plan will benefit your family business today and into the future.
A Solid Succession Plan can Reduce the Potential for Conflict
Succession planning need not always lead to conflict, but if it’s not carefully, there’s more of a chance that conflicts and challenges will arise.
Why would issues or conflicts come up? Back in the day, it was common for family businesses to be passed along to younger generations.
Younger generations today, however, are more likely to have competing interests and priorities.
Business owners need to be realistic about the possibility that their own family may not want the family business and that non-family members may be more appropriate choices as successors.
To that end, the business owner needs to consider how invested their family truly is in the business, whether they will stick it out for the long term, and how likely the family (or others) would be to manage the business well in the case of an untimely death.
Here are some key points to remember as you move towards this important transition:
- Be patient.
- Acknowledge generational differences.
- Practice due diligence.
A business lawyer will help you with succession activities to do with both day-to-day business operations and more significant issues such as crisis management.
What should a succession plan include?
When it comes to a succession plan, where do you start? Or how do you go about revamping one that you made years ago?
First off, make sure you have a reputable business lawyer as part of your support team. They will help to make sure you have all your bases covered to avoid legal disputes.
They may also help with business operations, employment issues, intellectual property, contracts, and more.
A succession plan may include information related to:
- Retirement dates and details
- Intellectual property
- How to update contracts
- Managing taxes and licensing
- How to handle an unexpected death or disability
- Estate planning and inheritance
- Financial planning
- Ownership transfer
- Strategic planning and management
- Costs
- Company growth
- Stock
- Equity
- Business valuation
- Personnel and employment
- Succession with non-family members
- Insurance
- Operations and marketing
The key here is to prep people in the present to make sure that they can take on major responsibilities in the case of an emergency and that they are ready to manage the business long-term.
Financial planners, accountants, and insurance advisors should be a part of the support team involved in crafting a succession plan with your business lawyer.
Considerations for Your Succession Plan
COVID-19 pandemic was a big reminder of things that can come in and completely blindside us regarding how our business is managed.
That’s why it’s more important than ever that business owners take stock of the bigger picture, as early as possible to give the business a better chance at succeeding in the future.
Here are the type of questions anyone who is developing a succession plan should be asking themselves:
- What’s ideal for you and your retirement?
- How important is it to keep the business in the family?
- Is your family interested in taking over, and if so, how involved do they want to be?
- What type of future vision does your family have?
- Is the business ready to weather economic uncertainty?
- Can you make any changes now that will make a transfer easier?
- Should you include non-family members in the succession plan?
- Are successors ready and trained?
- Other than an unexpected event, when will the transfer take place?
- How is your estate planning being handled on the whole?
- What are some things that your support team can do now to optimize profits for successors?
Business owners should do everything they can to make sure employees, managers, and everyone involved in the business is prepared for change; this should not just be about successors but about everyone who makes the business run.
Fostering familiarity and understanding as early as possible will leave you more peace of mind when you retire. It can take years to get teams trained to take on such a massive responsibility, so letting people know ahead of time will make everything smoother.
Don’t forget to include non-family members who are fully invested in the business. Those who have demonstrated loyalty and hard work, including management and employees who have been with you for the long haul.
Stay transparent about your plans and intentions to foster trust, and your best team members will be more likely to stay on board.
Get Support with Your Business Succession Plan
The topic of succession planning is never a comfortable one. Still, the earlier this reality is addressed with all possible successors, the more likely your business will be to stay stable.
The best course of action will depend on several things, including your business structure and growth projections.
Get familiar with your options as early as possible, and get legal counsel to protect and guide you.
If you’re looking for a business lawyer in Colorado, call us or schedule an appointment today.
