December 10, 2013
Succession planning may be one of the most important strategies for maintaining the longevity of a business, yet a recent LegalZoom survey shows only one in four small business owners has a plan in place.
That can spell disaster for the next generation. “Owners of businesses of all sizes have an idea in their heads about how succession will go, but they don’t make it formal,” says David W. Burleigh, Partner at Buechner, Haffner, Meyers & Koenig Co., L.P.A. law firm in Cincinnati. Then when the need to transition arises, there’s no plan — which could lead to confusion, fights among potential successors and lost business.
“Putting a succession plan in writing gives clarity to everyone,” Burleigh says.
During the following stages of your business’ growth, consider evaluating or modifying your succession plan to ensure that it is consistent with your vision for the business’ future.
1. The business is up and running.
The timing is different for every business, but once your company has value associated with it, including steady income, as well as customers and employees, then it is time to consider creating a succession plan. “Make sure your will and trusts are updated to define who will run the business and who will inherit it after you are gone,” says Scott Mahon, Managing Director of Wealth Strategy for Ascent Private Capital Management of U.S. Bank. “No matter how old you are, it’s valuable to have a contingency plan laid out for the worst-case scenario.”