If you’ve developed a successful business through years of hard work, you may want the business to continue in some form in the event of retirement, death, or disability. Perhaps you want a family member to inherit and manage it, or you want the family to own the business but have it be run by a trained management team. Perhaps you want to sell the business and make sure that it sells at a fair value and is run well. There’s a lot to consider: to make sure everything will run smoothly at the time you leave the business for whatever reason, you need to prepare what is called a succession plan.
By their very nature, these plans are fairly complicated: so start thinking about gathering together your professional advisors, such as your business attorney, your estate planning attorney, your business accountant, and your financial advisor.
One of the most important decisions you’ll need to make is choosing who will take on the responsibilities of ownership and management. It may be that you have already have a great management team, and that team can continue to successfully run the business. Or you may want to draw up a detailed job description and hire your successor. If family members will be running the business, look at the different skills of family members and discuss with them your needs and their interests. Once decisions are made about who will succeed you, whether you keep the business in the family or sell it, you need to train the successor, to ensure the continued success of the business.
If you plan on selling the business, you will need to valuate it—determine what it’s worth. This again is a complicated process, and you’ll have to draw on the expertise of your team of advisors to get it right. And those advisors will shepherd you through the other complexities of planning a business succession: for example, setting up a buy-sell agreement and funding the buy-sell with life insurance. The key to success is to create a comprehensive plan now that addresses all eventualities.