Business succession planning for the small business owner

June 15, 2013 (Press-News.org) Business succession planning for the small business owner

Article provided by Campbell Kyle Proffitt LLP
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Whether because of death, retirement or the desire to spend more time with family, small business owners eventually turn over the reigns of their businesses. Unfortunately, many small business owners do not anticipate this eventuality and do not develop a business succession plan as a result.

A business succession plan, if done with care, can ensure that the business is in good hands and continues to succeed after the owner has moved on. However, the process can be tricky, as it is often difficult to choose a successor, especially in a family or closely held business, as family members or long-term employees can feel entitled to take the reigns.

How to make a smooth transition

Experts offer many recommendations on how to make the transition as easy as possible. First of all, it is important not to wait until the last minute before putting together a business succession plan. The owner(s) of the business need plenty of time to determine who would best run the company and if any outside help is necessary to ease the transition. In general, it is recommended to begin business succession planning about five years before an anticipated change in ownership.

Choosing a successor for a small business is the same as it is for finding the right CEO of a large company. In determining the best person for the job, the owner should keep the business' needs foremost in mind. In doing so, Experts recommend picking the person who can best do three tasks: make a business strategy, put the strategy into effect and minimize risk. The best person for the job should not simply mimic the management choices or style of the outgoing owner, but should have an individual vision of the business' future coupled with the drive to make it a reality.

As the business would likely fail if an unprepared leader is suddenly put in charge, once a successor has been chosen, it is important to inform the future owner and prepare them for their role. As it can often take years to adequately pass on knowledge of the operations and finances of the business, it is vital to start bringing the new owner up to speed as soon as possible. Starting early also gives the outgoing owner the opportunity to observe and correct any weaknesses in the new owner's abilities.

As early as practical, it is helpful for the outgoing owner to inform the employees of his or her choice of successor and to express confidence in his or her abilities. This can help eliminate future problems caused by doubt or jealousy of the new owner.

Consult an attorney

Above all, the outgoing business owner should not be reluctant to seek outside financial or legal experts when planning the transition. An experienced business law attorney can help ensure that the transition goes smoothly with a minimum of adverse consequences.