Are you a business owner without a succession plan? If so, you’re not alone. According to a recent poll from Nationwide, 60 percent of small-business owners don’t have a succession plan in place. Among those without one, nearly half believe such a plan isn’t necessary.1
If you don’t have a succession strategy, you could be exposing your business, employees and family to significant risk. A business succession plan is a document that creates an orderly transition between you and the next owner.
A succession plan protects your interests, as well as those of the people around you. You can use a succession plan to maximize the value of your business and even to retain some form of control or financial involvement. The plan can help you identify the right successor and transition the business without a disruption to operations or cash flow.
Still don’t think you need a succession plan? Below are three common myths related to business succession planning. If these sound familiar to you, it may be time to reconsider your thinking. A financial professional can help you develop and implement your business succession strategy.
You’re too young to worry about succession.
You may assume that you don’t need to worry about succession planning because you’re too young to worry about retirement. After all, you have a business to run. You have more urgent priorities than worrying about who will take over your business after you retire. You may think you won’t retire at all.
The truth is it’s never too early to think about succession. In fact, the earlier you start, the more options you may have. You can use that time to identify and groom a successor. You can make strategic improvements to your business to increase its value. You can even have early conversations with potential buyers to feel out their perspective. Time is your ally when it comes to planning.
It’s also possible that you won’t get to choose your exit date. You may be forced out of the business because of disability or even death. If so, your succession plan could be an invaluable tool to help ease the transition and protect the business and your family.
It’s easy to pass a business to your kids.
Like many business owners, you may dream of passing your company to your children. Unfortunately, many businesses don’t survive a transition to the next generation. According to a recent study, only one-third of businesses survive a transition to the second generation. Just 13 percent make it to the third generation.2
If your goal is to pass the business to family, a succession plan becomes even more important. You may have multiple family members who want to lead the business. You could create hard feelings when you choose your successor. You also may need to make sure everyone feels valued and compensated, even if they’re not a key part of the business. Family dynamics can be tricky, but planning can make them easier to navigate.
Business succession means giving up control or income.
Finally, you may resist succession planning because you think it means giving up control of your life’s work. After all, you built this business. You likely want to lead it and benefit from it as long as possible.
Succession planning doesn’t mean giving up control, though. Your plan may not be implemented for years. Even when it is implemented, it may have you gradually transition out of the business over time. You could even stay on board as an adviser or a consultant. You can also structure your plan so you continue to earn income from the business long after you retire.
Ready to develop your business succession plan? Let’s talk about it. Contact us today at Spicer Wealth. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
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