Succession planning is about protecting the value of your business so that you can take care of your customers, your suppliers, your employees and, most importantly, your family.
Succession planning starts in any one of the four following places: the kitchen table, the boardroom table, the hospital emergency room or the funeral home. Clearly, the last two are not good. The key is to get started today.
It’s easier than you think. The good news is that there are only two main steps in succession planning. The rest is just details.
The two steps are management and ownership, in that order.
Management is about who runs your company and how they do it. The first place to start is with an organizational chart. Draw where you are today (by role, not person) and what the company will need to look like in three to five years, or when it is two or three times as large. Then, identify who on your team can be promoted or trained to fill in new roles in the future. For gaps or vacancies, you will need to recruit or develop other people.
Ownership is the second step to a succession plan. This may require setting up a family trust to hold your shares instead of you holding them personally. It may also involve transferring part or all of your shares to family members or selling to employees or a third party.
You have several options available to facilitate an ownership transfer in order to protect the equity that you’ve built up in your company, convert that equity into cash that you can invest personally, and minimize or defer taxes.
That’s the nuts and bolts of succession planning.