Business succession planning is a lot like estate planning. The two are related in that you can address both issues at the same time and under the guidance of the same representative.
Many business owners try to create a succession plan alone or delegate the task to the human resources (HR) department. Although you and your staff understand your goals, legal guidance may help you avoid mistakes that could derail your succession plans. Here are a few examples of errors to be aware of.
Putting it off too long
Waiting until retirement looms near can be a recipe for disaster. Contrary to common belief, you need time, effort and thought to create a meaningful succession plan.
Get started on yours at least a few years before you intend to leave the business. An early start can help you be ready if something causes you to leave earlier than planned, like an injury or illness.
Thinking it’s one-and-done
Many things can change in the time between creating a succession plan and executing it. For example, you may find someone better suited to succeed you, or your first choice may become unavailable.
If you fail to update your plan, your business could suffer. Schedule periodic plan reviews to ensure it always meets your unique needs.
Taking a do-it-yourself approach
Whether you want to save money or time, do not let the convenience of a premade cookie-cutter succession plan lure you. In many cases, pre-drafted or all-purpose legal documents can fail to protect the interests of business owners. Instead, consider getting experienced legal guidance so you can make arrangements that are right for your business.