Perhaps you’ve already heard of it, but what is “business succession” and why is it important? As a business owner, maybe you’ve thought your future outside of work– but what about the future of your business without you?
Business succession is the process through which business owners identifyhow their business will be transitioned to new ownership/management when the time is appropriate. To put business succession in simpler terms, you could call it exit planning. Business succession plans are commonly associated with retirement; however, they can provide guidance and peace-of-mind through unexpected events that affect business ownership. Succession planning is important to the long-term vitality of a business. It provides a guideline for the transfer of ownership, administration, wealth, and knowledge of the business.
Succession planning can help reduce the tax burden of a transition, whether that may be to new ownership or a family successor. Succession planning provides options to meet your business goals, whether that may be continued income or legacy. Without a succession plan, your business may be risking a rough transition which stresses new owners, stakeholders, and the health of the business.
Succession planning allows owners free agency over the future of their business and the goals they wish to meet. It can help ensure the vitality of the business through to new ownership, which in turn affects your legacy and continued income. Without a succession plan a business may lack direction moving forward in the absence of management or ownership. This uncertainty could cause a business to lose value, lessening the likelihood of a successful transition beyond previous ownership. As more business owners reach the age where they consider retirement, the issue of business succession will become more common. In the United States, 78% of business owners have no written transition plan to ensure the continuity of their business.
Here are some tips to get the process of business succession planning started:
- Consider the financial health and viability of your business, especially over the last three years.
- Get a business valuation to target improvements you can make to your business.
- Create a leadership transition plan.
- Advertise that you’re seeking to transition your business.
- Offer mentorship to a new owner.
Interested in finding more information? Click here to access guides, reports, podcasts, and more about business succession. Feel free to contact Dodge County EDA for further resources and support at: firstname.lastname@example.org