While small business owners may not have the same reach as larger companies, they can still prepare to pass their company down the same way bigger businesses do. Regardless of the size of your business, there is a right way to handle succession planning.
SCORE breaks down succession planning for small business owners. Keeping the following tips in mind may help you enjoy peace of mind and continued success.
Choose the right exit strategy
Business owners have several options for stepping down and turning the company over to the next generation. They can sell to an outside party, an essential team member or a business partner. A family-owned and -operated business may have an heir interested in taking the reins. All options come with unique advantages and disadvantages, which makes it crucial for business owners to thoroughly explore their options.
Determine the current worth of the company
Performing a professional business valuation is a must. Determining the company’s worth helps owners plan for retirement, entice investors and calculate owner and partner shares. Business valuation also helps owners buy enough insurance to cover the company.
Prepare for the hand-off
Once a business owner chooses a successor, that person should know about and feel comfortable with the designation. That way, the candidate has time to decide if she or he feels up to the task. Proper preparation also allows the current owner to bring the new owner up to speed on business operations.
Look over the succession plan regularly
Just like estate planning, succession plans require regular review. Owners may reconsider passing the company down to a once-favorable candidate, and candidates may do the same.
With so many options available, it may be wise to speak with an experienced business law attorney in order to make an informed decision for your company.