If you have just started your own business, or are in the process of growing a small one into a larger one, it might seem counterintuitive to start thinking about your exit strategy now. However, having a clear picture of what will happen down the line is crucial for proper planning, and for being successful in the shorter term. Here are four things to think about when you are formulating your business succession plans:
1. Start early.
A succession plan should be in place before you need it, at least five years before you plan to retire or exit. A succession plan requires time and considerable thought, and the earlier you start that, the better. We recommend you start thinking about succession when you take care of your core estate planning. Remember, you can always change your mind or tweak your plan if you need to.
2. Work towards your ideal outcome.
If you identify what your long-term goals are, then you will be able to make the best decisions for today. What do you want to see happen? Sell the business to the highest bidder? Transition to the current management team? Cultivate it for your children? Each of these outcomes requires different approaches, decisions, and execution strategies now.
3. Identify your team of advisors.
An experienced team of advisors is important. It is wise to identify and involve your family, financial and legal advisors, and possibly business partners. It may also make sense to involve a friend you trust, because that person knows you well, and can be candid with you about your plans. It is also important that your team be able to communicate and work with each other.
4. Openly communicate your plans.
Once you know what your plan is, don’t keep it a secret. Advance communications help you, your family, and your business deal with both the execution and the consequences of your decisions. If you have decided to sell to the highest bidder, then tell your children in advance. If you have identified an internal manager as a successor, then tell that person so he or she remains on board and, more importantly, incentivized to perform and make decisions that maximize the value of the entity. There is no upside to surprising everyone when the endgame is nearing.
For assistance with any legal needs related to your business planning, or any other business or estate planning needs, contact Fournier Legal Services for a free consultation at firstname.lastname@example.org or 860.670.3535.
Joe received his law degree from the University of North Carolina–Chapel Hill School of Law and his Accounting degree from the University of Rhode Island. He is admitted to practice law in Connecticut, Massachusetts, and Rhode Island, and he is a CPA. He is an Adjunct Professor and lecturer at the University level and has been a frequent speaker on business planning and legal matters.