Just as it sounds, exit planning is a comprehensive strategy for a New York business owner to leave his or her company and provide direction for the succession of leadership.
The best time to begin succession planning is when your business is starting to succeed. Well, maybe you missed that memo. Still, if you can see retirement in the future, you should create a business succession plan.
While most folks think of a succession plan as directions for when you retire, it can also be extremely helpful in the event that you become disabled or pass away suddenly. That’s why the time is now to draft your succession or exit plan. This plan will serve as the guide for passing the control of the business to others, no matter the circumstances.
Do Many Small Business See the Importance of Strategic Business Succession Planning?
Unfortunately, no. If you don’t have a business succession plan, you’re not alone.
The number of small business owners without a business succession plan is quite staggering. Research by Wilmington Trust in 2017 of 200 business owners found that 58% of the small business owners they surveyed had no business succession plan. And another poll conducted of business owners revealed that 60% had no business succession plan. In fact, the survey found only 21% of owners have a specific plan and had started executing it.
Plus, sadly, of those businesses without a business succession plan, nearly half (47%) of the owners believed no succession plan was necessary. That can’t be further from the truth.
What are the Benefits of a Business Succession Plan or Exit Plan in New York?
It’s not uncommon for business owners to be hesitant to even start plans for a transition—primarily because they don’t want to think about ceding control of the company they shaped and built. This is even more evident when they’ve been actively involved on a day-to-day basis. But these feelings shouldn’t be a roadblock to smart long-term planning.
Transition planning has a number of benefits to an owner and all of his or her stakeholders; moreover, business owners con contribute possible strategies for transferring ownership that keep them engaged with the company.
How can a well-drafted succession or exit plan for your business can help you?
Provide Financial Stability For Your Family Before, During, And After The Transition
Most business owners are pragmatic about their motivations for creating a detailed succession plan. The Wilmington Trust survey shows that, by a wide margin, the top two reasons for planning are: (i) concerns about aging; and (ii) to provide financial security for their family.
Without a plan, the owner’s family may be forced to sell the business to cover taxes or pay liabilities upon the owner’s death. Control of the business also could go to those who have no interest or aptitude for managing it. Plus, family members may battle for control and/or disposition of the business. A well-drafted business succession plan or exit plan will avoid these consequences.
Prepare Your New York Company to Handle Unexpected Situations
Many business owners think they have a strong plan just because they have written instructions for who will manage their business if they die or become disabled. That’s a necessary step, but it’s not enough. And it’s really just a crisis protocol. Unfortunately, many owners fail to plan beyond the immediate aftermath of an ownership crisis.
You could be hit by a bus crossing the street on the way to work tomorrow morning. If you don’t show up, who’s in charge? Will it be one of your children or a trusted employee? Is he or she up to speed and can they handle our clients, vendors, and prospects? Can he or she lead the other employees?
Hopefully, you have someone in mind. Now think about whether that person is equipped with all of the tools and training to assume control. If they’re not, you need to consider this in your business succession planning.
Also, the threat of death or serious complications from COVID-19 is all too real. Though we take precautions, we can still be exposed to the virus, which can mean a full, 14-day quarantine and perhaps business interruption. Plus, you plan should discuss how the company will succeed in similar situations.
Moreover, in addition to a plan for your incapacitation, you can plan for what to do in the event of the incapacitation of key employees. So, just merely naming a successor won’t cut it.
Identify Weaknesses Within The Company and Prepare a Plan to Address Those Issues ASAP
Taking an objective look at your company in your succession planning can help you identify the strengths and weaknesses in the business. This process can help you isolate weak points, and addressing these weak points is critical to your near-term organizing strategy. You want to decrease, neutralize, or hopefully fix them. This can enhance the strong points that will permit opportunistic actions and decrease threats.
Identify Your Successor Clearly to Employees and Leadership
You should begin considering your eventual successor many years prior to your anticipated retirement. As mentioned above, no matter if you know who will succeed you, you’ll need time to train them and make sure that clients, vendors, and other employees are comfortable with their leadership.
Define Your Role In Your New York Small Business After the Transfer of Ownership
A well-drafted business succession plan or exit plan allows you to decide how you will exit the business. And this might include creating one or more roles for yourself to continue working for the company after transitioning the company to a new owner. You may want to be a consultant or work part-time to ensure the continuity of the operations.
Identify Critical Positions and Create A Plan To Ensure Continuity
A vital component of succession planning is identifying crucial positions—roles that have a significant impact on your company. Without them, your company would be unable to effectively meet its objectives. A business owner can pinpoint critical positions in a business by performing a risk assessment.
Contact Love Law Firm Sooner Rather Than Later
Let us help you craft the strategic Exit or Succession Plan your business needs to continue to succeed and deliver stability to you, the new owners, and the employees!