Drafting a succession plan now can help your business stand the test of time.
As a business owner, you’ve invested so much into making your business successful – hard work, time, money, energy.
It’s truly hard to imagine your business without you. But chances are there will come a day when someone else will take the reins. And a seamless succession plan, one carefully and thoughtfully devised well in advance, is essential to making sure your business enjoys continued success for generations to come.
The facts are a bit grim. Only 30% of privately held businesses survive into the second generation, and less than 15% survive into the third, according to Nuveen Investments. However, a well-planned transition strategy can help support your business’s longevity.
For many hardworking business owners, succession planning represents the notion they can be replaced – a pretty uncomfortable scenario. Perhaps that explains why only a third of business owners surveyed for the 2018 U.S. Trust Insights report on Wealth and Worth had established a formal succession strategy.
But in the manner estate planning seeks to protect your loved ones and assure your wishes are carried out as you intend, a succession plan does the same for your business if for any reason you are no longer there. In short, it’s designed to safeguard your legacy.
A thorough succession plan considers not only your exit from the business, but also your retirement needs and personal estate. It provides for an orderly transition of management and the passing of control of the business. It also avoids the potential pitfalls of loved ones having to make difficult decisions during stressful times, or leaving the future of your business to happenstance.
And it’s never too early to start thinking things through.
With your professional advisors, consider these questions:
You may want to groom an heir from within the family, groom someone outside the family, consider an outright sale, or have an expert take over until your chosen heir is old enough or fully prepared. Any one of those scenarios takes time to develop.
The financial implications of business succession are complex, but you and your financial advisor can tap into several strategies to help you refine your plan.
Here are a few examples:
Putting a plan in place means you and your business are prepared come what may, even in the case of disability or an untimely death. But it’s not just about being prepared in an emergency. It’s about sustainability.
While these can be difficult conversations to have with family members and business associates, they can actually bring comfort – knowing everyone is on the same page when it comes to the future success of your business.
Source: Nuveen Investments
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