Business Succession Planning – Four Tips
Earlier in the week we focused on the Why’s and How’s of business succession planning; now, we will address four tips for a successful business succession plan.
- Do it now – 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 should take time and considerable thought and the importance of early planning cannot be overstated. Accordingly, we recommend you start thinking about business succession planning when you take care of your core estate planning. Remember that you can change your mind or tweak your plan if your situation changes.
- Think about your ideal outcome. If you think about your long-term goals – your ideal outcome – then you are more likely to make better decisions today that will allow you to achieve those goals. Planning in advance is important, so it is a good idea to consider whether you plan to sell the business to the highest bidder, transition to the current management team, or cultivate it for your children. Each of these outcomes requires different approaches and execution strategies now.
- 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 may know you well, and therefore may be more likely to be candid with you about your long term plans. It is also important that your team be able to communicate and work with each other.
- Openly communicate your plans. Once you know what your plan is, then there is no reason to 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 it is important for your children to know in advance. If you have identified an internal manager as a successor, then it is clearly important for that person to know so they remain on board, and remain incented to make decisions that maximize the value of the entity. There is no upside to surprising everyone when an exit is near.
For assistance with any legal matters related to your business or estate planning, contact Fournier Legal Services at jfournier@jeflegal.com or 860.670.3535 now for a consultation and planning session.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.