Businesses are part of people’s legacy. They embody all their hard work, sweat, and tears. They provide people with a sense of stability, assurance, and continuity. But everything must come to an end.
People live finite lives, but their businesses can last as long as their executives. The oldest business known to us is Kongo Gumi, found in Japan. This construction company has lasted for more than 1,400 years, and putting a new meaning to the saying, “built to last.”
Legacies such as Kongo Gumi require preservation. This is why it’s essential to keep the business in the family by passing it down to the next generation. That’s why it’s crucial to have a well-thought-out succession plan. Here are a few things you should consider when planning your company’s succession.
Keep it Going or Sell it?
The very first thing you have to ask yourself is whether you want to keep your business or sell it. If you want to keep it, then you’ll need to find a successor and groom them for the role. If you’re thinking of selling, then you’ll need to decide what the asking price will be and find a buyer who is interested in your company.
The former will be more hectic but rewarding. The latter is much easier, especially if you already have sellers. Take a tip from us, and it might be better to sell a business once it reaches ten years old. Not many businesses reach this point, and you can easily get millions out of that deal, and you no longer have to burden yourself or your family when it comes to succession.
So let’s say that you end up keeping your business, so what’s next?
Pick an Heir
Your business is an asset, and much like any asset, it goes under estate planning. You’ll need to pick an heir and groom them for the role. This is a difficult process, as you want to make sure that the person you choose is capable and will take care of your legacy. You also have to make sure that they are ready to handle the responsibility.
You don’t want to leave your business in the hands of someone who will squander it or ruin everything you’ve built. That’s why it’s important to do your research on the potential successor and ask them tough questions about their plans for the future.
If you’re having trouble picking someone, then maybe you should consider appointing a board of directors instead. They can help manage and oversee the company until a suitable heir is found.
Create a Transition Plan
Once you’ve picked an heir, you’ll need to create a transition plan. This plan will outline how the transfer of power will take place. It should include the date of the transfer, what will be transferred over, and how the transition will be executed.
You’ll also need to create a communication plan. This plan will ensure that both parties are kept in the loop about what’s going on. You don’t want your heir to feel left out or unimportant. The last thing you want is to feel like they’re taking over a business that’s already falling apart.
It might be better to hire someone to do it for you when it comes to the legal side of things. Some companies like Keystone-Law can undoubtedly help you out with this. They can also help with the other parts of your estate planning.
Have a Backup Plan
Make sure that you also have a backup plan if something goes wrong. Murphy’s Law is always in effect, and you don’t want your business to go under because of a mistake.
A backup plan should entail a few different things. First, you’ll need to have a contingency fund. This fund will help you keep your business afloat in an emergency. You should also plan what you’ll do if your heir decides they don’t want the company or can’t handle it.
Another thing you should do is make sure that your business is sustainable. That means that you should have a plan for the future and how you’ll continue to make money. If you don’t have a solid plan in place, your successor will have difficulty keeping things afloat.
Keep in mind that these are just some of the things you’ll need to consider when planning your company’s succession. There are undoubtedly other factors that come into play, but these are some of the most important ones. So take your time and make sure to plan accordingly. You don’t want your business to fall apart after you’re gone.