Succession planning ensures your business avoid the risks and pitfalls of failing to plan for the future
Once upon a time, someone who owned a business died, had no succession planning in place, and the entire enterprise became a complete mess. Sometimes the situation gets so bad, the business fails.
Pretty much every business owner or partner has heard a story like this. As the old saying goes, “failing to plan is planning to fail.” When it comes to how much work you’ve put into building your business, a solid succession plan is a final building block that can help your enterprise navigate its transition when you move on.
Fortunately, effective succession planning is something any business owner can do, especially with the guidance and advice of an experienced Oregon business attorney. At heart, your succession planning process is about:
- How the company will transition to new ownership once you retire or otherwise leave the business
- The process you and other key players will follow to prepare a plan
- Identifying and training your successor
- And, ultimately, you passing the reins and leaving your current role in the business
Here are a few things to keep in mind.
What is succession planning?
Your Oregon business succession plan is a written, documented process for how the company will continue operations under new leadership, with a change in partner(s), and/or new ownership. A thorough plan will typically incorporate scenarios around partners and key management in the event of retirement, incapacitation, death, or other circumstance where a key partner or manager voluntarily, involuntarily, or unexpectedly is no longer part of the business.
Succession plans can help ensure continuity (especially in the case of entities such as sole proprietorships or single-member LLCs). It may also help in keeping essential staff on board, or help you positively manage taxes or retain the value of assets and stock. And, a succession plan can ensure that the business continues to provide income to you or your surviving family members.
When a business is building its succession plan, it typically considers four ways to handle the transfer of ownership from the current owner or partner to the new owner or partner:
- Fellow co-owner
- Relative or heir
- Essential employee tapped as a successor
- Third party organization
If you fail to plan, you plan to fail
All this said, planning your business’s succession does not always feel like a good project. It can mean confronting a vision of your life without being involved in your business. It can also mean dealing with planning for your death, illness, or injury.
Succession planning is essential, but that doesn’t mean it’s easy or always comfortable. That’s why many businesses don’t do it. Unfortunately, that failure to plan can easily result in, at best, a bumpy road and an uncertain future. At worst, it can mean that the business falls into a leadership vacuum and never moves on to the possibility of ongoing success in a new chapter.
How to build succession planning for the business’s future beyond your leadership
The more in advance you can plan succession, but more clear-headed you can face the task—and gain the peace of mind of knowing that your enterprise’s course is set.
It’s not uncommon for owners and partners to set their succession plan during their forties. The process can typically take at least a year. Plus, just like you regularly review your business plan and overall strategy, you’ll want to regularly review your succession plan to ensure it’s still current, aligned with the company’s path, and has the right people set to take over.
What to address in your Oregon business continuity plan
As you work with your Oregon business lawyer and other key partners and personnel to set up and review your succession plan, here are some typical tasks:
- Plan expected transition timeline and/or succession triggers
- Agree primary and secondary successor (or successors)
- Conduct a business valuation to set the business’s value (this process may take at least six months to two years)
- If necessary, procure life insurance policies with death benefits paid out to co-owners, partners, or the successor(s), depending on your plan
- Allocate resources for the transition, including for relevant taxes
- As needed, inform relatives, top clients, and/or key employees about the business’s future and transition
- Include contingency plans, such as if a new successor needs to be found
- Specify the successor’s roles, responsibilities, and any necessary training, education, or experienced expected or required in order to fulfill the succession
- Train the successor
- Review the plan on a regular basis, such as every one or two years
Beyond planning and review, the next big step of the process is executing the succession plan and actually transitioning the business to its future.
Prepare your business for its next chapter
There’s no doubt: Succession planning is an involved process. It takes time and resources, and it requires talking frankly about potentially uncomfortable situations, such as retirement, injury, illness, or death.
However, your enterprise is much more likely to continue if you take the time now to set up a solid succession plan for your Oregon business.
Luckily, you can plan your succession. Even better, you don’t have to tackle this yourself.
Succession planning with the advice and guidance of an experienced Oregon business attorney
Navigating business succession takes time, but the process can go far smoother with the right lawyer by your side.