Business owners have to consider the short-term and long-term needs of the company. One aspect of business ownership they may not have thought about yet is succession planning.
Succession planning is a strategic plan that outlines how leadership and ownership of a company will be passed down to the next generation when the current generation is unable to continue handling their roles. This can be because of retirement or even death. A comprehensive succession plan can minimize business disruptions and protect the company.
Key elements of a succession plan
One of the first steps of creating a successful succession plan is to identify the individuals who will be named in the plan. This should include individuals who will replace key people in the plan. The candidates should have skills and experience that enable them to handle their duties. They should also be aligned with the company’s vision and mission.
Once the key individuals and their successors are determined, the transition method and timeline should be determined. It’s typically a good idea to plan for a transition period that allows for gradual changes; however, that may not be possible in the case of an unexpected death or incapacitation of a key individual.
Succession plans can be altered as the need arises. It’s important to account for the transitory needs, as well as the financial and tax implications that come with these changes. Understanding how the business and owners will be affected by each aspect of the succession plan is critical.