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How can small business owners prepare for business succession?
Business succession planning is something every business owner needs to think about at some point, and the earlier the better. The need to come up with a viable plan to pass on one’s business is particularly important for small business owners who are alone responsible for passing on their business. Unfortunately, too many small business owners fail to take steps to come up with a transition plan, or do so too late.
Although the recommended succession plan will vary from business to business, several important steps can at least be identified. First, it is definitely helpful for a business owner to have a clear idea of when they are planning to officially step out of their role. Coming up with a succession date allows the business to take appropriate steps on an appropriate timetable. Some business owners will be able to set a date more precisely than others who may want to continue working as long as they are able. Even in cases where a business owner wants to continue on for as long as possible, a tentative date can be set and used as the basis for succession planning.
After a date is set, business owners need to work on an ongoing basis at cultivating trustworthy associates and partners to whom they could potentially pass the business. There are no shortcuts in this task, and business owners need to come up with a process for identifying worthy individuals and preparing for transition.
Transitioning out of the business does not have to happen all at once, though, and a business owner may wish to retain some involvement in the business even after stepping down. Attorneys, for instance, often retain a degree of interest in their practice, and this approach can be taken in other fields of business.
The important thing with any business succession planning, again, is to start the planning process early on to ensure that one has clear goals for the transition and develops effective means for achieving those goals.
Source: wealthmanagement.com, “Succession Planning for Sole Practitioner or Small Law Office,” Nat Wasserstein,” November 3, 2014.
