Last week, we talked about the importance of business owners having a succession plan in place. In that article, it was part of a broader estate planning strategy to keep a business running effectively should something happen to you. This week, we want to delve into this topic a little further and really get to the heart of what succession planning is and how it can help your business beyond just your personal estate plan.
The term “succession plan” can be viewed in multiple ways by a business owner. As part of your personal estate plan, it is important to have a plan in place in the event of an accident or illness that keeps you from performing your usual leadership roles. It would include things like appointing other people to take over, determining power of attorney and clarifying key business management issues in your will. Another important step is establishing a clear buy-sell agreement that stipulates how your ownership stake in the company will be reassigned if you pass on. The buy-sell agreement can actually be part of a business-oriented life insurance plan that names successors and can provide helpful capital to help a company get through a sudden ownership and leadership change.
These are all necessary estate planning steps you should be taking as a business owner to keep your business running while you are gone, whether it’s a temporary disability or a permanent departure. If you haven’t already read my last article, check it out here.
The concept of succession planning can also apply to all levels of employment in your company, primarily the key management roles. What happens if someone vital to your business decides to retire, accept another position elsewhere or has a personal tragedy? You need to have contingencies in place and you’ll want to know exactly who then fills that empty role.
Succession planning in this sense goes well beyond just knowing what individuals will be moving up the ladder as positions become open. The more you plan and stay ahead of the game, the smoother this process will become. It’s all about identifying potential in each in every one of your employees. Who can you start grooming now for management positions in the future? How high are they capable of climbing?
A sound succession plan should apply to your own position as owner or principal in a company, as well as all vital management roles that affect the future success of your business. If something does happen, you will always be prepared with the next steps of succession.
Here are 5 steps I recommend for succession planning:
If you have a succession plan in place for yourself and for other key positions in your company, you will be able to keep things running smoothly no matter what happens. From your personal estate plan to your overall business plan, succession planning is extremely important.
To learn more about succession planning and wise estate planning as a business owner, talk with the expert advisors at Illumination Wealth. Contact us today!