Do you own your own business or are in business with several partners? Are you a CEO of a fairly decent size company with multiple key employees? Do you have a plan in place to address the sudden loss of your partner, your top performing employees, or even you? If these questions apply to you, you will want to read this.
Succession planning is an essential part of doing business, no matter how certain your future appears. It’s easy to put off planning when everything seems to be going so well. But in an instant everything can change. The best thing one can do is be as best prepared as possible. Succession planning comes in different forms, but in essence it is just that, planning for the succession of you, the company’s employees, and your partners with the goal of continued success for the company, its owners, staff, and customers. In one form succession planning identifies and develops internal people with the potential to fill key business leadership positions in the company. This will increase the availability of experienced and capable employees that are prepared to assume these roles as they become available. To put it more narrowly, “replacement planning” for key roles is the heart of succession planning.
Another form of succession planning lies with partnerships between two or more members. When times are good and the partners are healthy, there is usually little concern about having a viable succession plan. However, what if one of the partners develops a long-term disability or suddenly passes away? What will happen to the business?
This is why it is essential to put a proper plan in place – to make the partnership business succession a success. A buy-sell agreement is a great starting point. The buy-sell agreement sets out the terms for the purchase of the business by the surviving owners in the event one of the owners passes away or becomes disabled. One of the key purposes of this agreement is to reassure customers, employees, and vendors that the business will continue uninterrupted and be free from litigation in the event the company were to suddenly lose one of its owners.
Planning for the success of your company is essential. But it doesn’t always include budgets, forecasts, and effective marketing strategies. You want to make sure the company is viable to sustain the unexpected loss of key employees, partners and CEOs. Therefore, it is extremely important not to wait until it is too late and implement an effective cross- training plan for your employees, and/or consult with an insurance or financial professional with expertise in business succession planning.