Why Business Owners Should Have a Succession Plan in Place
As the COVID-19 pandemic continues to burden society, many business owners have faced challenges, from staffing shortages to economic struggles. While many people are distracted by the daily grind of running a business, especially in these difficult times, some may have lost sight of planning for the future.
All business owners, regardless of the reason, should have a succession plan in place. Without an adequate plan or with no plan at all, business owners face significant risks if they are unable to work. The owner should have the structure and tools in place for running the business in their absence and for when they’re ready to retire.
A business succession plan
A business succession plan is a blueprint for the future of your business. It involves who will take over ownership or run the business after you retire, or if you become disabled, or when you die.
A succession plan may include the business’s valuation, formal operating procedures, future leadership structure, and more. The first step for many people in developing a succession plan is determining who will lead the business in the future. Business owners may decide to sell to a co-owner, pass the business down to a family member, or sell the business to an employee or outside party.
Every business needs a succession plan to guarantee that operations continue and customers don’t experience an interruption in service. A well-crafted succession plan benefits everyone, including the current owner, the employees, and the successor.
When should I create a succession plan?
Business owners should create their succession plans immediately if they don’t have one in place. Having a plan that details how the business will transition, who will take over ownership and become responsible for daily operations, and how partners and heirs will be compensated will help reduce the stressors created by the owner’s departure.
What is keyman insurance?
Keyman (also known as a key person) insurance is a life insurance policy the business purchases on the life of the owner, founder, top executive, or another individual who is key to the function of the organization. The insurance is also available as disability coverage in the event the person is incapacitated and unable to work. Business owners may wish to incorporate keyman insurance in their business succession plans.
Help is available
The business and estate planning attorneys at O’Reilly Rancilio are available to answer your questions regarding business succession planning. For more information, please call 586-726-1000 or visit our website.