Running a small business means planning not just for daily operations but also the long-term success of the company. That means planning for the future until you leave the company and also what will happen if you retire, die or experience a medical emergency that stops you from doing your job.
If you have begun thinking about your retirement, then you need to start thinking about who will step up to fill your role as owner or executive. Succession planning is how you can ensure a smooth transition of authority leadership when you leave the company.
What issues do you need to address while succession planning for your small business?
Consider how to transfer ownership
Do you have a child who will step into an ownership role at the company when they inherit it from you? Do you intend to sell your ownership interest to other people when you retire? Determining the best way to pass ownership and authority to the next generation is an important part of succession planning.
The relationship you have with the person who will take your role and the way you hold the business will directly influence the best approach to transferring ownership of the company. In some cases, you will need to make a transfer slowly to avoid triggering taxes. Other times, you may choose not to transfer ownership but only executive responsibilities to a specific person.
You may also need to adjust other areas of your business model or your estate plan to reflect the changes made regarding the ownership of your company.
Think about the training your replacement will need
Even if someone has served as your immediate subordinate for years, they may not understand the unique demands of your position. You should include as much in a written plan as possible so that the new executive has something to reference in the future.
A good succession plan includes a transitional timeline where you provide support to the individual taking over your role at the company. Having between six months and a year during which you jointly perform your job responsibilities can allow you to ease into retirement with the confidence that your successor knows exactly how to handle the position you gave them.
Careful planning can minimize the disruptions that occur when the next generation of employees takes over at your small business.