Succession planning is a process that identifies and develops new leaders for a business to replace the old leaders when they retire or move on. For small businesses, it often entails passing the business on from one generation to the next. The process can be stressful and time consuming with so many variables to consider and plan for to ensure a smooth transition and the business continues to thrive. Some of the most important factors to consider are the following:
- Who do I sell to? Inside or outside of the family? What is the process?
- How much is the business actually worth?
- What do I need to do to minimize taxes when I sell?
- Will I have enough money to retire after selling the business?
To ensure a successful transition of the business to new ownership, whether inside or outside the family, requires a plan that covers the legal, accounting and finance side of a transaction as well as a roadmap outlining the necessary steps for the transition of responsibility and leadership. An effective succession plan requires years of planning and preparation but is worth the effort if done properly.