A recent Nationwide survey finds that a majority of business owners do not have a business succession plan in place. However, a plan is a critical component of providing seamless continuity in a time of crisis or transition. This infographic shows some of the major gaps in leader change readiness. Talk to your advisor today about Business Succession planning.
How Will Your Business Survive?
Having a succession plan in place can ensure the continuity of your business. According to Nationwide’s 2016 Business Succession survey, 60% of companies do not have a succession plan. Not having a plan impacts the survival of your business, and the partners and employees who have helped you most in building your company.
What Happens to Your Business if Something Happens to You?
Every business owner has to give up their position at some point, whether it’s planned or not.
According to Nationwide’s survey, 47% of business owners don’t find business succession planning necessary, but with unexpected life events, you could face a transition sooner than expected.
Don’t wait until a crisis occurs to begin thinking about what your business will look like without you.
Critical Factors to Consider
Effective business succession planning goes well beyond who gets what; It’s about who is going to do what.
Having the proper funding at the time of succession may be crucial for the continued success of your business.
can help you continue your business in the event of an owner’s death, disability, or retirement.
Key Person Insurance
can help cover financial losses in the event of a key contributor’s death
Business owners shouldn’t expect their successors to run the business successfully if they don’t provide them with the skills and guidance to handle the role. It’s the responsibility of the business owner to do so.
Identify and start training successor(s) now to maintain the businesses’ infrastructure and culture
Name more than one successor in case primary successor is unable to fill role
Implement a “development plan” to train your successor(s) over time
Create job descriptions for all key roles in your business
Note positions you expect turnover in 5-10 years
Develop a Team
Even business owners with a plan in place may not be taking the proper steps: according to Nationwide’s survey, less than half of business owners with a plan have discussed their plan with a lawyer or financial advisor.
The right approach should involve:
A Strong, Open Partnership from the beginning, between business owner, advisor, accountant, and lawyer.
Transparency with a team of experts to understand the unique circumstances of your business.
Consequences of Not Having a Plan in Place
With a poorly designed succession plan, or lack of one altogether, your business is likely to struggle in transition. If you don’t decide what will become of your business after you’re gone, you may be putting your company’s future at risk.
Some Consequences May Include
- Diminished value of your business
- Potential loss of key employees and/or clients
- Managers left without a plan of action
Role of the Financial Advisor
Financial advisors can help business owners address the unknowns and concerns of business succession planning.
Do you know the right time to set up a succession plan?
Do you know who to work with to create a business succession plan?
Have you prioritized time to create a plan?
Do you understand the government regulations involved in succession planning?
If you answered no to any of these questions, it may be time to find an advisor to help.