Four Ways to Build a Successful Business Succession Plan
As a business owner, the list of “what keeps you up at night” is varied and often endless. Maybe it’s wondering who would answer your emails or sign the checks if you couldn’t come into the office tomorrow. Perhaps it’s curiosity about how your business idea will (or won’t) survive an ever-changing business climate. Or it’s fearing retirement is just a dream and longing for an escape from the hustle. Tackling any one of issues may seem insurmountable, but taking steps to impact them will prove invaluable.
Ultimately, every business needs to plan for succession to help ensure it remains operational, even if you are not. No matter if you’re a startup business owner or decades into your venture, you can facilitate a successful transition of your business when you consider the following four ways to build a succession plan:
Create emergency policies and procedures
A Canadian-based BitCoin exchange company QuadrigaCX continues to make headlines in the wake of its CEO’s mysterious death in December 2018. QuadrigaCX’s customers, owed approximately $190 million, were understandably frustrated with the inability to access their digital funds, as the company kept no administrative logs and had no contingency plan for the loss of its leader. If you’re flying by the seat of your pants, it’s time to get buttoned up. Start your day with a large cup of caffeine, take 30 minutes, and just document what you do and how you do it. Securely store log-in information for key systems and programs. Disasters do happen, whether physically to you, naturally to your facility or digitally to your data, so discuss with your family and/or staff how to handle daily operations if something happens and you’re not available.
Value your business
Does the phrase EBITDA mean anything to you? For business owners not interested in selling, this may seem foreign, but calculating your “earnings before interest, taxes, depreciation, and amortization” may just help you see opportunities for improvement. Is it time for a price increase or operational expense audit? Even if you don’t intend to sell anytime soon, knowing the value of your company helps you make informed decisions about how to invest in the future.
Value your intangibles
But what about those items that don’t have a price tag? Does your business utilize trademarks, patents or copyrights? You and your employees (truly your most invaluable, intangible asset) can help prevent misappropriation and infringement of your intellectual property. If you contract with vendors who provide a wide range of services including website design, graphic/logo design, photographers, copywriters and more, it’s time to get well-written contracts in place to clarify ownership. And back to your employees – do they know how much you value them? If you are considering selling or transitioning your business to key personnel, have those discussions sooner than later.
Plan your estate
If you intend to run your business as long as you’re on this earth and/or want to protect its future, along with your family’s (see tip #1), you should have an estate plan in place. Beyond basic elements of an estate plan that include wills and powers of attorney for finances and health, a business owner’s estate plan needs to coordinate with buy/sell agreements, life insurance policies and company documents, and power of attorney for disability. Proper documents help protect your business and everything you’ve worked for when you no longer can.
Thoughtful communication and meaningful discussions with your family, partners and employees can help you get started on your succession plan. Don’t let another sleepless night go by without making a move towards peace of mind, continued business viability, and a strong return on investment.
Attorney Jack Gross counsels businesses of all sizes in general matters pertaining to the day-to-day operations of their business. With a focus on business law, intellectual property and real estate, he advises business owners on succession plans, ensuring these plans are in alignment with individual and family estate and tax planning goals.