Succession Planning for Small Business Owners

Written By: Kevin Reardon, CFP®

Succession planning is an essential aspect for small business owners to ensure legacy and a smooth transition to retirement. It involves creating a detailed plan to transfer leadership and ownership of a business to family members, employees or an outside buyer. Many small business owners fail to consider succession planning until it’s too late, leaving their businesses vulnerable to failure or disruption. Here are reasons why this process is critical, along with challenge questions that need to be answered.

Ensures Business Continuity

Succession planning ensures that the business can continue to operate successfully, even after the current owner leaves. A well-executed succession plan can minimize disruptions to operations, preserve customer relationships, and maintain financial stability. This is especially important for family-owned businesses, where the sudden loss of a key family member could have severe consequences.

Question: If you were to die tomorrow, what disruption would this cause to your business?

Helps Identify and Develop Key Employees

Succession planning involves identifying and developing key employees who can take over leadership roles in the future. By investing in employee development, small business owners create a strong pipeline of future leaders who are knowledgeable about the business operations and culture. This can also help to increase employee engagement and retention.

Question: Have you properly prepared and empowered your key employees and management team to take over the business?

Facilitates a Smooth Transition

A well-planned succession can facilitate a smooth transition of ownership and leadership, reducing the risk of conflict or confusion. A comprehensive plan can provide clarity about the roles and responsibilities of the new owners and leaders, as well as the timeline for the transition. This can help to minimize the stress and uncertainty that often accompanies a change in ownership.

Question: Who will function as the visionary when you are gone and are they prepared to make difficult decisions related to the future direction of the company?

Preserves the Owner’s Legacy

For many small business owners, their businesses are not just sources of income, but also reflections of their personal and professional legacies. A succession plan can preserve the values, mission and culture even after the owner leaves. This can also help maintain reputation and brand image.

Question: What legacy, if any, do you hope to leave for your clients, employees and community?

Maximizes Value for the Owner and Their Family

By planning for the future, small business owners can identify opportunities to increase the value of their business, such as investing in new technology or expanding into new markets. A well-planned succession can also help minimize taxes and other expenses associated with transfer of ownership.

Question: Have you spent proper time, energy and resources in order to maximize your business succession?

Shakespeare has been advising business owners for 25 years. We help create and facilitate a financial plan to maintain your lifestyle upon transfer of ownership by addressing key legal, tax and financial issues. Read more about the steps your Shakespeare advisor can help with on our Selling a Business page. Give us a call if you would like to discuss your succession plan to ensure your business will continue to thrive and grow for generations to come.