What’s Your Exit Strategy? The Importance of Business Succession Planning
“Failing to plan is planning to fail.”
Are you a small business owner or planning to start a business? If so, keep reading. If not, still keep reading. When’s the last time you reviewed your business succession plan? Better yet, do you have a one? Or right now are you asking, what is a business succession plan? Well let’s answer that question.
What is a Business Succession Plan?
A business succession plan is the procedure developed by a business owner to ensure the continuity and smooth transition of his or her business to successors, when or if the business owner, voluntarily, unexpectedly, or otherwise leaves the business.
A good business succession plan is the blueprint to how the operations will be transferred to new leadership. It takes into consideration, among other things, how the new leadership will be trained, estate taxes, insurance, the business owners’ retirement; and should be a part of every business owners overall estate plan.
If you’re a business owner, hopefully, you already have a business succession plan and you review it regularly. However, if you do not have a business succession plan, over the course of the next several months, I will provide you with tips to help you get started.
So Why Do I Need a Business Succession Plan?
We started out answering the question, “What is a business succession plan?” Next we will answer the question, “Why is business succession planning important?” But first let’s take a look at some statistics.
- An estimated, 40.3% of family business owners are expected to retire by 2017. Less than half (½) that expect to retire within the next five years have selected a successor.1
- 4% of family business owners have no estate plan other than a will. And only a little over 50% of those owners report having a “good understanding” of the amount of estate taxes that may be due upon death.1
- Almost 70% of family businesses desire to leave their legacy to the next generation; However, only 30% will actually be successful.1
- Approximately, 30% of family owned businesses will survive to the second generation, 12% into the third generation, and only approximately, 3% into the “fourth generation or beyond.” 2
According to research, the majority of family owned businesses that fail to thrive into future generations is the result of failure to plan for transition to the next generation. 2 A good business succession plan is a vital component to finishing well. It can mean the difference between your business’ continuation for generations to come or its end once you are no longer at the reigns.
Don’t wait till the fire starts to buy a fire extinguisher. It’s too late then. The sooner you put a plan in place to secure the future of your business, the better. We can’t control everything that happens in life, but we can certainly, put measures in place to secure a better outcome. Strategic succession planning can help do that for you and for your business.
HERE’s to your SUCCESS!
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