Succession Planning: Here’s What Business Owners Need to Know

As a small to medium-sized business owner, you have likely invested years of hard work into getting your business off the ground, turning it into the successful company it is today. However, being so focused on ensuring your business is taken care of in the present often means business owners do not give much thought to what will happen to their business in the future when they are no longer around. In the event that you retire, fall ill, or die suddenly, what will happen to your business? You will want to ensure that you have someone you trust who can step in and steer your company into the future once you are no longer around. Otherwise, your employees may scramble to find a suitable replacement if you suddenly exit the company. This is why it is so critical that business owners have a succession plan in place. 

A well-rounded succession plan can help your business thrive no matter what happens in the future by identifying future leaders and giving them the tools and resources they need during a transition should you or an associate suddenly exit the company. While succession planning can seem like an overwhelming prospect, it is a critical step for all entrepreneurs to take if they want to ensure the future success of their business. Fortunately, a business lawyer can help guide you through the process of creating an effective succession plan. 

If you have not created a succession plan for your business, keep reading to learn more about what a succession plan is, why it is important, and the role a business attorney plays in the process of creating a succession plan.       

What is Succession Planning in Business?

If you do not currently have a succession plan for your business, you may find yourself wondering what exactly a succession plan is. At its core, succession planning refers to a type of business strategy companies use to pass leadership roles, or ownership of a company, to another employee or group of employees. Succession planning ensures that your business is able to continue running smoothly with minimal interruption should you or another high-level employee retire, fall ill, or pass away suddenly. Succession planning is particularly important in family-owned businesses, as, without a succession plan in place that dictates who will take over the company when you are gone, your death could lead to disputes between relatives. In such cases, succession planning plays a key role in ensuring a small business continues to thrive after the owner’s death by providing a framework for continued operations. 

What Are The Benefits of Succession Planning?

Succession planning is important for any business to help it continue running without interruption when there is a change in leadership or ownership. Having a succession plan in place is particularly important in ensuring things run smoothly when there is a sudden change in leadership, such as due to the death or displacement of a team member or owner. In this circumstance, a succession plan can prove beneficial by:

  • Helping prevent disputes amongst family members.
  • Protecting business assets.
  • Helping determine the future direction the company will take.
  • And ensuring the continuity of business operations after a sudden change in leadership.

Having a succession plan in place can prove instrumental in ensuring that your business is able to continue operating as normal even if you or another high-level associate were to suddenly leave the company.

What Goes into Creating a Succession Plan?

Creating a successful succession plan involves long-term planning. As such, your succession plan should be updated annually in order to ensure that your company is ready for unexpected changes in the future. A succession plan for your business should include:

  • Cross-training employees in order to ensure that they are ready to take on different roles if there is a sudden change in leadership or ownership.
  • Identifying employees who will be worthy of advancement as leadership retires/passes away.
  • Identification of employees, family members, or outside individuals who can own or manage the business in the future.
  • Creating a retention plan to ensure that the business stays within the family if you pass away suddenly.
  • And creating a clear procedure for executing the business succession plan when the time comes.    

Ultimately, your succession plan should be tailor-made to meet the needs of your business and the potential challenges your company could face in the future should you or another high-level employee leave the company. You should consider working with a business attorney when creating your succession plan, as they can help you to determine what your succession plan should include. Additionally, they have the experience to help you avoid making mistakes when creating your succession plan that could create problems for your company after you are gone.  

Work With an Experienced San Francisco Business Lawyer When Creating a Succession Plan

Considering you have likely worked most of your adult life building your business and turning it into the successful enterprise that it is today, it is important that you have a plan in place to ensure it continues operating after you are gone. However, unless you have a comprehensive succession plan in place, an accident or sudden illness could be all that it takes to throw your successful business into chaos. Taking the time to create a succession plan is then vital in ensuring your company’s future is protected. 

This is why it is important that you work with an experienced San Francisco business attorney as you start the process of creating a succession plan. The fact is that succession planning can be overwhelming if it is something you haven’t done before, and you may not even know where to start or what you need to do to protect your company’s future. Fortunately, an experienced business lawyer knows what is at stake and what steps need to be taken to ensure your company’s long-term objectives are met.

Feel free to contact our attorneys to learn more about what goes into creating a business succession plan, as well as to find out how we can help get you started.