“Most of my clients spend more time planning a two-week vacation than they do the succession of a business,” commented one estate planning and business succession attorney from California. And she’s right; most business owners are much more comfortable planning for next week than they are planning for what would happen to the business if they died or became incapacitated.
Many business owners essentially are the businesses they operate. It’s your style, your ability to get things done, and your track record that drive your business. But your business supports your family and the families of your employees. It has financial connections to vendors, suppliers and customers, all of whom are relying on your business to continue operating. There’s a lot at stake.
Unless you’ve been actively grooming someone to take over for you, chances are there is no single person who could do everything you do. That means it may not be obvious what should be done in the case of your demise. Your family would be full of grief and might not focus immediately on the needs of the business. Or, they might begin squabbling about ownership and inheritances, to the detriment of the company you worked so hard to build.
A solid, intentional business succession plan could prevent chaos and disruption. It could save your business for another generation, or at least allow it to be wound down properly.
Business succession planning is about getting your legal requirements nailed down, but it’s also about making it possible to manage the practical, day-to-day details of the business.
Depending on the structure of your business and the legal requirements of operating it, you may need to get some things in order. For example, if you’ve been operating rather casually, you may need to formalize your policies and procedures. If operating the business requires a license that only you have, you’ll need to identify a process for getting a licensed person involved when you’re not there.
Social media is an area of special importance. Your business may not be able to operate successfully if no one has the password to the company’s contact email account. The website needs to be updated periodically. The company may have a blog that needs to be written. How will your successors handle Facebook and LinkedIn if you haven’t included the passwords in your succession plan?
A business succession plan can give direction for continuing the business or for winding it down. It can prevent disputes among your heirs and between your business colleagues. It can prevent disruption and losses. Done well, it might even help you improve the way you run your business now.