What happens to your business if you pass away? What if you're in an accident and you're too badly injured to communicate? This may seem grim, but there will be times when you can't run your own business. You might even just decide to retire early.
A succession plan is what governs what happens to your business when you are gone, either temporarily or permanently. Without a succession plan, people may not know what you intended for your business.
What Does a Succession Plan Cover?
A succession plan will cover who is in charge in the event that you are temporarily impaired, in addition to who should take over in the event that you are permanently removed from the company. This is important because an emergency can happen at any time. In order to remain successful, your business needs to be able to mobilize fast, and someone has to take charge.
Imagine a situation in which you are in a car accident and cannot talk. Though you'll recover in a few months, what will you return to? Will your business have smoothly operated in your absence? Or will your business have been paralyzed?
Document Your Business Management and Processes
When it comes to succession, the most important thing is to document every part of your business. For example, all of your business processes have to be written down. If you suddenly disappeared tomorrow, your business needs to be able to operate. Whoever is in charge has to know where to find vendor information, customer information, and other critical data. If they don't have access to this, then they won't be able to effectively run the business.
Choose a Successor
You can have both a short-term (interim) successor and a long-term successor. A short-term successor is someone on the ground who will immediately know how to run the business. This is often someone directly under you. They can also be the long-term successor, but they may not be.
It may be that a long-term successor will need to be nominated by your C-suite, or it may be that you intend to leave your business to family. Either way, your successors need to understand what their roles and responsibilities are. Your successors must know exactly what to do and where to go in case they have to take over.
Establish the Goals and Mission of the Business
Your succession plan should also give your successor guidance regarding what you want for the business. What do you envision the business achieving? What market space do you think the business will grow into in the coming years? All of these things should be answered so that your successor understands the intricacies of what your business is about and what goals it seeks to achieve.
Every successor is going to need support, in terms of talented and experienced advisors. In addition to listing successors, you should also list people that your successor can go to for information. These should be people who you trust, who are specialized in specific areas such as law and accounting. Your successor will rely upon these people as they learn the ropes and begin guiding the business.
Don't Forget About Legal and Tax Implications
Depending on the structure of your business, there may be some legal or tax implications regarding any transition. Your lawyer will be able to tell you more about the technicalities once you have a reliable plan in place.
A succession plan takes over when you aren't able to. No one ever plans to have to use their succession plan early, and that's why it's important to make one as soon as possible. The experts at Kisner Law Firm can help review your organization's structure and help you create a succession plan perfect for your business.