Are you starting to feel the lure of retirement but are not quite ready to hand off your small business? If so, now is the perfect time to review your business’s succession plan. If you don’t have one, now is the time to prepare one. Planning for succession of your business can be complicated, and you will want to meet with various advisors, including financial, legal and tax advisors to complete your plan. In the meantime, here are a few key factors to consider.
Who will take the reins?
Perhaps the most important question for you to ask is who will take over the business when you retire. Do you have a child or family member interested in the job? What about a current employee? If so, is that person right for the job? Perhaps you have some doubts about the person’s readiness to take over. Consider whether they may benefit from further training or coursework to help them prepare. Work with the person to develop the skills they will need. If you need to hire someone new, an executive recruiter could be very helpful.
Partners and other owners
If you set your business up as a partnership or some other small business formation, you may have other owners involved in the business. Perhaps you plan to simply sell your portion of the business to them in a buy-sell agreement. Your business formation documents should spell out how ownership can be transferred and when. The size of your organization will usually dictate how formal the arrangements must be.
Selling your business
If your family is not interested in continuing the business, you may be considering a sale. Whether you sell to a partner, employees or on the open market, you will need to figure out how much the business is worth. Most buyers will insist on an appraisal done by a certified public accountant. You may want to begin this process earlier than you think. Selling a company is not as simple as it sounds.
Prepare for the unexpected
Of course, you plan to be healthy and happy through many years of retirement, but life can change quickly. If you suddenly become ill or incapacitated, or even die, before you retire or sell your business, make sure you have safe-guards in place. Life insurance can be very helpful for the business to continue through an unexpected transition. Your estate plan should specify how to handle your business, as well.
You have built a business you are proud of. You should protect your legacy by preparing your business for a future after you leave.