No matter where your business is located—a small town, a city, or in a rural community—or your business's size—you may have a one-person shop or run a business with more than 100 employees—chances are you occasionally worry about whether the success you're enjoying from your business today will continue once you're no longer involved.
These changes are exactly why business succession and business continuation plans are so important—they help designate exactly what happens to your business when you move on due to retirement, death or disability.
Building the Right Plan
A comprehensive business succession plan addresses the who, what, why and how your business will operate in the future. A financial professional can help provide specific guidance on the best succession plan for you and your company. But all succession plans should address:
- Goals for the business's future.
- Your successor(s).
- Ownership responsibilities.
- Key person and management roles.
- Critical logistics.
Transitioning Your Business
If your business succession plan includes selling it to co-owners, family members or outside third parties, a buy-sell agreement may also be included. A buy-sell agreement:
- Guarantees a buyer.
- Can establish a fair price.
- Helps set purchase terms and identifies events that trigger a buyout.
- Can provide cash to the business owner in case of disability, withdrawal or retirement.
- Helps with business continuation and in ironing out conflicts.
Replacing the Irreplaceable
The success of most businesses also depends on more than the business owner—there are often key employees who are just as critical to a business's success. What losses might your business experience if these key people were lost? Business owners can identify key employees—those with decision-making powers and/or special talents—and build them into the business succession plan. Key employee life insurance is one way to help offset the loss of a key employee.
There are many strategies that can be implemented to execute a business succession plan that will meet your goals and objectives. For further insight on business continuation, talk to a financial professional. With a well-considered plan, you can feel confident that your business will be well-positioned for the next generation.