When you started your business, what was your goal? If your goal was to build your business and sell, you need a business succession plan. If you are building your business to leave a legacy for your children's children, you need a business succession plan. Even if you have no idea as to what will happen when you decide/or have to rest from the daily work of running a business, you need a business succession plan.
Here's why:
People Get Sick, Even Business Owners
As the single owner or one of the owners for your small business, life happens. Be it a car accident (heaven forbid), an illness (heaven forbid), a complicated pregnancy (heaven forbid), a parent needed full-time care, there may be a time in your life where someone else has to take over your business and run it for you. Part of the business succession planning purpose is to delineate who will take over for you in the time that you cannot perform your duties. The time to figure out who is going to keep up with your orders or complete those service calls is not when you are headed out the door for a season. The time to do so is at the inception of your business formation.
Children's Children
Your goal may have been to leave a business for your family to build wealth and grow. If you have more than one child, even if you have only one child, they may not want full time participation in the family business after you are not running it any longer. You may have one child that is heavily involved in the business and the others are off doing their own thing yet receiving the benefits of being your, the business owner's, child. The business succession plan will delineate who will take over when you have decided your full-time work has expired and who will continue to receive a portion of the profits of the business. Having this plan in writing, preferably stored with your attorney or in a bank safe deposit box, prevents a lot of the drama that is known to be prevalent in passing property along.
Sell, Merge, Acquire
If you are building this business to sell for a large sum in a few years, plan at what time or at what height of revenue you will begin to place your business on the market. You may not even want to sell the entire business. Your goal may be to remove yourself to a minority shareholder role in your corporation or minority member percentage with your LLC. If so, this plan needs to be placed in writing. Because the inevitable happens. If you are not there to begin the sale process, someone needs to be put in place to be able to take over your role and understand exactly how you want the process to unfold.
Mind-reading Is Not An Aspect of the Law
There are some states, like Tennessee, where an oral statement will suffice regarding succession of property. I can only speak of Tennessee because, of the states that I am licensed, Tennessee is the only state that permits this type of succession. Having your succession plan in writing ensures that anyone attempting to pick up where you left off can continue the processes you built. Sometimes the reason for removal from your business is short lived. You can make a recovery and pick up where you left off. If that is the case, you don't want to come back to a mess that you have to spend cleaning up. It's like going out of town. You leave your house clean so that when you get back, you can rest until you have rejuvenated to unpack and get ready for the next day. The same goes for business succession planning. The plan leaves a nice tidy house for someone else to live in after you leave permanently or for only a season.
You Are Not Planning to Die
You may be thinking, I'm fairly young and in good health. Planning to be dead or incapacitated is so morbid. People are going to think I'm weird. Let them think that you are weird. This is about making sure your affairs are in order should anything happen to you. Though they have comments to say about your succession planning now, when they need that plan, they will be excited as to how much easier it is to transition into your role without you there to ask questions.
Even I, as a law firm owner, need to have a succession plan. The State Bar of Georgia requests that all attorneys have a designated attorney that understands their case load to take over should anything happen to the attorney. This is the go-to person should you no longer be able to run their business, especially if you are the sole owner of the law firm, even more so if you are the only attorney in your law firm. Jonathan Hawkins, an attorney for law firms, (Yes, that is a thing...) gave a seminar at the State Bar of Georgia Solo and Small Firm Conference with the topic of law firm succession planning.
When you make a plan, see it through to the end. Consider beginning, middle, and end. Will this plan change as your business changes? Of course it will. A business is almost like a person that does not have a body or mortality; it can live in perpetuity. Yet in that perpetuity, it grows and slims. It gains experience and has highs and lows. Some perish prematurely and other see generations and centuries go by. Your business will mold and change according to the direction needed for growth, therefore, your business succession plan will change and need to be amended as well. For the easiest transition, put it in writing and place it away for safe keeping.
If you have any questions regarding this post or business succession planning for your business, feel free to click on the button in the upper right hand corner to schedule a time to meet with me to discuss.
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