3 Succession Planning Tips for Small Business Owners
Small business owners typically have plans for just about everything – how to grow the business, how to expand into new markets, how to keep things afloat during an emergency. But one thing that’s typically left off the list is succession planning.
That’s because many entrepreneurs aren’t quite sure what an “exit” even looks like.
For some, it might conjure up images of ditching the suit, walking out of the office and heading for a tropical location. But exits take many forms.
An exit might be a private equity sale, a public offering, or handing off the baton to your children. Sometimes, reality isn’t so kind, and an owner might be forced into retirement by injury, illness or even death.
Pleasant or not, succession planning is a vial and yet often-overlooked part of being a small business owner. The following are a few succession planning tips on how to prepare yourself for an exit, however you might make yours.
3 Tips for Making a Business Exit
- Select and Groom the Heir to the Throne: Whether you exit on your own accord or it happens by surprise, the best succession plan probably isn’t a company-wide lottery where the winner gets dibs on the corner office. Instead, you need to start evaluating existing personnel now to see if someone has the qualities you value in an eventual successor – and has earned your trust. A successor doesn’t necessarily have to be able to perform all the same functions; if you’re a wearer of many hats, you might delegate certain duties to multiple employees. But someone must be positioned to lead.Whoever that is must be trained in the critical operations of the business and be given chances to take on leadership duties. This process could (and should) take several years, providing ample time to get the would-be successor trained up, as well as evaluate whether the person you’ve selected truly has what it takes – because if not, you must be able to move on and bring up another candidate.
- Prepare Yourself for Life After Leading: While succession planning necessarily must include what happens to the business after you’re gone, it also must include what happens to you once your business is gone. If you’re not already investing in a 401(k), IRA or other retirement plan, now’s the time to start. While you’ll be free of the everyday responsibilities of leadership once you exit, you’ll also be free of the salary … but not free of the daily bills. Retirement plans can help augment Social Security to ensure you stay afloat once you’ve exited your company, but they’re most effective with longer investing horizons, so start today. Also look into disability and life insurance options to provide for you and your family in the event of calamity.
- Discuss Succession Plans With Others: The company’s future need not be a secret. You should confer with key personnel – and even consider outside advisers – about what should happen in the event that you exit the business in one way or another. That not only exposes you to valuable insights and angles you might not have thought about, but better prepares the company for what’s next so the transition period after your exit isn’t as tumultuous.
The advisers at McManamon & Co. can help you plan for many kinds of exits, such as going out via a merger or acquisition or handing off the company, and ensure your company is prepared should you have to leave the business earlier than expected.
Where’s the finish line, and what happens when you reach it? Call McManamon & Co. at 440.892.9088 or contact us online for help with succession planning and formulating the exit plan that’s right for you.
Tags: McManamon, small business, succession planning | Posted in McManamon & Co., Retirement Planning, small business