When you are in the midst of running your small business, a succession plan is likely the furthest thing from your mind. 

A good succession plan can help ensure that the transfer of ownership is smooth when you are ready to leave your business. With a proper succession plan taking up to five years to complete, now could be the time to begin your preparations to retire or sell your business. 

Why you need a succession plan 

Life has unexpected twists and tragedies. If you become ill or pass away suddenly, a succession plan is the best way to ensure your legacy and family’s livelihood are protected. A succession plan also makes it easy for you to retire or sell your business when you are ready to do so. 

How to create your succession plan

1. Think about a successor 

If you are planning for retirement or preparing for an unforeseen illness, you may want to transfer your small business to a family member or partner. Should you be planning to sell your business instead, you likely want to prepare for a third party buyer. Make sure you are always clear with your team of professionals about how you plan to exit your business and onto whom you want to pass your ownership. 

2. Consult with experts 

Speaking of professionals, you should consult with them while creating your succession plan. Who should you solicit advice from? At the least, you should meet with your accountant, financial planner, insurance broker, and – most importantly – your small business lawyer. They will be able to guide you in acquiring the documents and information necessary for your succession plan. 

3. Create your succession plan

Work with your small business lawyer to create your full succession plan. This should include: 

  • Business goals
  • How decisions will be made
  • A training plan
  • An estate plan
  • A contingency plan 
  • Your corporate structure 
  • Corporate transfer methods
  • Business valuation
  • An exit strategy timeline

Your small business lawyer may have additional material for you to prepare based on your field and unique company needs. If there is an unexpected tragedy, your lawyer will be able to use this file to help ensure your succession plan is put into action. 

4. Update your succession plan

Remember to update any changes to your business in your succession plan. In addition, remember to always let your lawyer know about any shifts in your succession plan. Without the most up-to-date information, your lawyer cannot provide you with the best assistance, especially if a tragedy does occur. 

If you are planning to sell your business, remember that creating a succession plan is just one aspect of the sale. There are a number of other steps that are important to consider.