If you want your business to continue after you retire, a solid succession plan could be essential. Given that some small businesses fail because of poor planning, you should know which mistakes to avoid as you compose a strategy to pass your business to a new owner.
Faulty estate planning sometimes involves not taking important actions when needed. Entrepreneur describes omissions that could endanger your plans for your business.
Failing to identify a successor
It could be hard to accept that someday you will not be running your business, which may cause you to delay important decisions such as identifying a successor. Still, you should select a potential new owner as early as possible, perhaps no less than five years before you retire. If you have co-owners, you should learn whether any of them will want to stay or if they all depart the business.
Failing to consult family members
Any relatives who work for you probably have expectations of what they will get out of your company after you step down. You should be honest with your family so you can help them understand what is to come. Listening to your relatives could also inspire changes in your plan that may head off familial conflict over who gets what from your company.
Failing to acquire professional help
Transitioning a business to a new owner could require the assistance of tax and financial professionals, especially if the business is complex in nature. In addition, consider retaining employees who have knowledge and expertise even after you depart. You might promote experienced workers into higher positions to help ease the transition.
Finally, you may benefit from reviewing your succession plan after completing it. Intervening events could prompt you to make changes to keep your succession strategy on track.
