Developing a strategically thought-out business succession plan is very important to the long-term success of any company. The business succession planning process is very complex, and the personal, legal and tax implications of the various options can be difficult to navigate without the help of a qualified professional. An experienced business lawyer can help you avoid the following pitfalls that may arise. 1. Delaying business succession planning. Small business owners are busy people with pressing matters at hand, but putting off succession planning can have disastrous results. People often avoid it because they get depressed thinking about the subject or believe there is plenty of time to take care of it. Accidents, injuries, and illnesses can happen. This is when a well-developed succession plan can make or break a business and its owner’s legacy. 2. Failing to develop clearly focused and defined goals. A major goal of succession planning should be to address issues relating to when is it time to sell or transfer power. What will the current owners do after the transfer? What percentage of the purchase price can be financed? Who would be a great buyer for the future of the business? A business succession plan defines a company’s successors, but once you have determined who will take over the company, outlining exactly what they will inherit is essential. 3. Failing to obtain an accurate valuation of the business. It is difficult to attract satisfactory buyers or successors unless there is agreement on a reasonable value of the business. Business owners are often surprised that the business they have established and the capital they have acquired has a much lower market value than they personally imagine it to be. An independent valuation can help owners determine a realistic fair market value for their business. 4. Keeping succession plans a secret. When a business succession plan is hidden from staff, it creates the impression that there is no plan or real concern about how the business will continue after the current owners are gone. Keeping succession plans a secret can also create significant missed opportunities, preventing existing managers and employees from identifying themselves as possible successors. Without clear expectations about the future, key personnel could also decide to leave. 5. Failing to train your chosen successor. Many businesses owners overlook the fact that new owners must possess or obtain critical skills and experience to successfully run the business they are buying. If a possible internal successor lacks key skills for running the business, a customized training program should be developed after completing an assessment of the successor’s needed skills and identifying what specific training is needed. 6. Failing to review and update your succession plan. Some businesses make the mistake of believing that after a succession plan is written there is no need to revise it. Succession planning is an ever-changing process that involves laying the groundwork for training, hiring, development and marketing. Succession plans must remain current and relevant, and should be periodically reviewed and updated to address internal changes and fluctuations in the marketplace. Although it can be challenging, with thoughtful planning and the help of experienced business lawyers like Carosella & Associates located in West Chester, PA, successful business succession planning is within your reach.
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