If you are the owner of a company, your business isn’t just your livelihood — it is also the legacy you will one day leave to your children and grandchildren. While it can be all too easy to focus on the daily operations of your business, owners also need to take the time for business succession planning. Notably, it’s crucial to ensure that your business will be able to run without interruption and continue to thrive in the event you decide to retire or the unexpected occurs. By creating a business succession plan, you can prepare your company for the future and protect the asset you worked so hard to build.

What is a Business Succession Plan?

A business succession plan is a strategy that helps ensure the continuation of your business into the future. It addresses how leadership should be transferred and who will assume management responsibilities when you pass away, decide to retire, or become incapacitated. A comprehensive business succession plan creates a process for developing the skills of future management and formalizes their training to keep your business moving forward toward the future.

You can also focus on the strategic direction you see your company going when building a succession plan. This allows you to define the objectives you want your business to achieve and provide clear direction for management and employees to follow. Establishing a strategy in a business succession plan can provide a framework for the longevity of your company — and give it a competitive advantage.

Why Do You Need a Business Succession Plan?

There are a number of benefits that come with having a business succession plan in place. Importantly, it can protect your company, strengthen your business, provide stability, and ensure continuity. It can also allow a company to outline its goals and the actions necessary to accomplish those objectives. Business succession planning is particularly important if you have a family-owned business, there are roles that require specialized skills within the company, or leadership is planning to retire within a few years.

Significantly, a business succession plan can help a company in many ways, including the following:

• Identifying successors who will own and operate your business
• Attracting investors
• Minimizing estate taxes
• Transferring your wealth more efficiently
• Maintaining the identity and core values of your brand
• Retaining motivated employees and management
• Creating a structure for training successors
• Helping your company grow into the future
• Improving your retirement planning
• Providing for your family members by ensuring access to liquidity
• Allowing you to retain control over what happens to your business
• Putting a plan in place to settle business debts

Business owners can also identify the vulnerabilities of their company, evaluate positions that may need to be filled in the future, and collect feedback during the process of creating a business succession plan. Specifically, in family-run businesses, a succession plan can reduce the potential for conflicts or disagreements over who will run the company — and ensure everyone is on the same page.

Important Considerations for Your Business Succession Plan

Business succession planning requires a proactive approach — and it’s best to begin planning as soon as possible to make sure you have the right leadership in place for the success of your company. A solid succession plan can take several years of strategic planning and training in order to ensure the right decisions are made. However, it’s important to understand that business succession planning is not a one-time event. It requires ongoing evaluation and should be assessed annually.

A business succession plan should be updated when changes occur or are anticipated in the company. During the time the succession strategies are being created and implemented, you might consider gradually easing yourself out of your leadership role and mentoring a successor. Training and sharing your insight can help your company’s management and employees develop the skills they will need to be well-prepared to step into their future roles.

In addition, it’s a good idea to obtain a business valuation when creating a succession plan. This can provide you with an understanding of the value of your business and be useful to help you make informed decisions. For instance, the information you learn from a valuation may help guide you when it comes to determining whether you will transfer the business to a family member or another party.

Contact an Experienced Ohio Business Succession Planning Attorney

If you own a business, it’s never too soon to start planning for the future. At Middleton Law Offices, we work with clients regarding a wide variety of business succession planning matters, from creating transfer plans, identifying successors, developing exit strategies, and obtaining business valuations. Offering reliable legal services for more than 100 years, we are dedicated to ensuring you have the peace of mind you need. Contact Middleton Law Offices today at 419.548.0196 for a consultation to learn how we can help.

Articles appearing in this column are intended to provide broad, general information about the law. This article is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from a licensed attorney.