Business succession planning is the process whereby a business owner develops a plan to transition the ownership and management of the business to other members of their family, some or all of the current management team, the employees or some other known person. The process for business succession planning may seem like it should be relatively straightforward, but the process can become quite complex. Often business succession planning involves coordinating input and planning with multiple parties, including family members and the company’s management team. In the case of creating an ESOP, all employees are involved in the exit planning implementation.
There are many issues that are likely to be faced during planning for business succession, including the following:
- Determining if the targeted new owner(s) have adequate financial resource to purchase the company.
- If, not can outside financing be arranged to fund the transaction?
- Is the current owner(s) willing to finance part of the business transaction?
- How long is the current business owner expected to continue to work in the business?
- How will the critical unique knowledge often held by the current owner be captured, documented and passed on to the new owners/management team?
- Who will manage the company after the business succession has occurred?
- Are there members of the family of the current owner who expect to gain ownership or management roles in the company after the transition?
- What type of training will be needed to train the new owners and new management team?
- Will the new owners and management team have a different management style? If so, how will this be implemented?
- How will all stakeholders be informed of the transition? Vendors? Customers? Employees? Lenders?
- Who will be responsible for implementing the business succession plan?
More information about Business Succession Planning can be found in The Exit Architect®Academy, a platform developed to help business owners prepare for their eventual exit.