As a business owner, you probably feel that your business is your baby. Business succession planning always seems so far off. It’s hard to think about what may happen to your business when you’re no longer able to run it. To ensure your business will keep running once you leave it, or to get top dollar for your business, now is the time to start thinking about a succession plan. 

Here are the business succession planning mistakes to avoid…

Not Planning Soon Enough

Some business owners put off thinking about succession planning until it’s necessary, which is one of the biggest business succession planning mistakes aside from not having a plan at all. Be it getting ready to retire, or an unexpected illness or emergency arises, rushing through the succession planning process will not bode well for the continued success of your business. Begin planning for the transition when that day is still far away. A good succession plan takes time to think through and plan for. What will the right framework be for the day when you transfer ownership of the business? Planning for the next phase will help you manage your business better now. 

Not Choosing the Right Successor

Many business owners dream of keeping their business in their family. While the dream of a family business that lasts generations is a wonderful thought, you need to consider if the next generation is willing and capable of continuing to run the business. Your loved ones may have other dreams, or simply may not have the capacity or skill set for business ownership. Keep an open mind when it comes to choosing the right successor, sometimes who you have in mind initially may not be the best option to take over when the time comes.

Keeping Your Plan a Secret

Keeping the details of your succession plan secret can lead to significant conflict. Estate planning disputes often arise because of failure to communicate, misunderstandings, and incorrect assumptions. The same is true for business succession planning. Transparency about your succession plans accomplishes several objectives. It instills employee trust in the company. It enables employees to know what is expected of them to advance in leadership positions. It motivates potential future leaders to achieve desired performance metrics and to commit to the business. It minimizes the risk of conflict because you can explain your plans while you are still with the business, ultimately leading to a smooth transition when the time comes.

Not Facing Reality

Some business owners refuse to admit that they are mortal and that business succession will have to happen. Your retirement or death is inevitable, so it’s better to be proactive about your succession and have it be on your terms instead of waiting for disaster to strike and having to react to it. Facing this reality early will only help you and your business to remain successful and survive the transition. This also means the transition will be on your terms and your business will be in the best possible condition for the transition.

Not Knowing the Value of Your Business

Some business owners have an inflated sense of their business’s value. While  you may feel your business is priceless, you must quantify its value as part of your succession planning. A firm understanding of the value of your business should inform your decision to sell the business, transfer it, keep a portion of it through your retirement, or make other plans for your succession. One objective way to value your business is to hire a business appraiser who can evaluate your financial documents, business goodwill, and historic data to provide an estimate of what your business is worth. This documentation will give you a clear sense of your business’s value and provide you with objective support if you decide to sell the business.

Your business is a huge source of pride in your life. It takes so much time and energy to get things right. Make sure that the same effort is put into a proper succession plan to give your business a successful next chapter, whatever you deem that to be. We can help you through the business succession planning process. Whether you already have a plan that needs updating, or starting from scratch, let us guide you through creating a plan that aligns with your goals. We offer a free consultation so we can learn about your business and your goals. Contact us with any questions and to set up your consultation. 

Sign up for our newsletter to receive business updates and estate planning tips right to your inbox!

Like us on Facebook to keep up with new blog posts and daily tips!

Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.