As a business owner, deciding to transition to the “next owner” can be a difficult and complex process. You have put your blood, sweat, and tears into making your business a success and want to see it continue to thrive. Here are six components to help you get a comprehensive Business Continuity and Succession Plan (BCSP) started:
Business Plan and Business Management Systems
Where is the business going and what is the health of the business? Include your vision for the business, culture, growth plans, the right people in the right seats, key differentiators and value drivers, financial resources and contingency plans.
Business Continuity Plan
What will happen when something bad happens to one of the business owners—buy-sell agreement, life insurance, and disability insurance. Be sure to have all these items included in your business continuity plan.
Business Succession Plan
Who do you want to manage, own and govern the business after you?
- Management Succession – Backfilling leadership positions, hiring and backfilling with more qualified people as company grows.
- Ownership Succession – Think about who do you want to own the business next. Is it family, key leaders, staff (ESOP) or none of the above?
- Governance – Establish a Board of Advisors or Board of Directors.
Personal Financial Plan
Prepare adequate resources for life after exiting the business and what to do with excess resources. Consider your cash flow (income-expenses), tax (income, capital gains, estate), risk (insurance, investments), estate, and philanthropy.
What will happen to your “stuff” upon their death?
Annual Business Review
Annual review of 1-5 above to ensure the BCSP stays current as time marches on and events happen.
No matter who your successor will be – family member, co-worker, or someone from outside your business – having the right collaboration advisor team is critical. Advisor teams can consist of: business/family advisor, attorney, CPA/Tax advisor, insurance advisor, Certified Financial Planner and of course, your trusted Hills Banker.
As you start your business succession plan remember that you should not underestimate the importance of the communication. Taking down barriers and allowing open communication will help you have the necessary complex conversations with your key decision makers.* Source: Alan Richardson, Transition Point Business Advisors