Business Succession Planning Checklist
As an entrepreneur, you are immensely proud of your business. In fact, you probably spend a lot of time planning how you will help your business continue to grow and thrive under your leadership. What many entrepreneurs are less good at however is planning how that business will grow and thrive should you not be there. Because the fact is – you won’t always be there.
Eventually, all entrepreneurs retire, sell their businesses – or die. So, if you would like for your business to continue after you’re no longer there, succession planning is extremely important. But where do you start? The following is a checklist that will help:
- Know how much your business is worth.
What is the value of your business’s assets after you’ve accounted for its debts? What is the monthly income in sales? Are you currently working on large contracts that will increase the value of the company? Knowing how much your business is worth is the first step to good succession planning, although since many entrepreneurs overestimate (or sometimes underestimate) the value of their company, it is a good idea to bring in an expert like a business lawyer that can help you with this.
- Talk to possible successors.
Especially if your business is a family business, you may be planning on leaving the company to your spouse – or one or more of your grown children. But are you sure they really want the business? If you have three children and only one is interested in running the business, you may want to look at estate equalization options to help ensure your assets are divided fairly and help avoid family conflict after you’re gone.
- Create a contingency plan.
Maybe you plan to retire in 10 years, but what if something happens before then? Will the business be able to continue its operations should you suddenly die or become disabled? Many businesses have “key people” with the skills to take charge in just such a situation. Having a written contingency plan will help ensure everyone knows their role should they suddenly have to run the business without you.
- Create a retirement plan.
While your contingency plan is meant to be used in an emergency, your retirement plan is a more deliberate transition from one owner to the next. Think about when you’d like to retire and who you’d like to pass or sell your business to. You may want to talk to your financial advisor to ensure you are in the right investment mix and that you will have enough income to live comfortably in retirement.
- Maximize the value of your business.
In order to ensure that you and/or your family get the most value out of your business, it is important to determine the most tax-effective method of structuring it and selling it. This should be done in consultation with your tax advisor or business lawyer.
- Revisit your plan.
As your business grows and as your individual circumstances change, you may also need to change your succession plan. It is important therefore to revisit your succession plan every few years – and whenever there is a major change in your business – to ensure that the plan you have will still serve you.
Contact Levy Zavet today
If you require assistance in the succession planning of your business, we can help. Contact us today to speak with one of our business lawyers.