Although it may be difficult for Massachusetts business owners to plan ahead for business succession, experts say it is a good idea. Proprietors may find themselves resistant to the idea, believing that because retirement is several decades away, they can put off the inevitable.
The American Bar Association defines business succession in a way that pushes back, framing the process as similar to others families prioritize: “the use of estate planning strategies to implement a survival plan for a business in the event of death or illness.” Husbands, wives, parents and others often put a “survival plan” in place early in life.
They do so not because they believe their lives will end soon, but because they believe anything can happen at anytime. Just in case the unexpected happens, they want the rest of the family to have their needs met. Like preparing for the unexpected, planning for business succession is one of the most critical aspects in an organization’s life, according to the ABA.
Challenges without a business succession plan
Some of the hurdles a company may face without a solid plan for succession include:
- Risking the failure of the business
- Jeopardizing family relationships if they cannot agree on details of the transition
- Running into challenges with cash flow
- Turning the business over to incompetent new management
Greater chances for success with a business succession plan
An article in Business Law Today points out the challenge of laying the groundwork for business succession long before its needed: The process is not simple, and “it requires clients to make difficult decisions out of context.” However, the article also notes the chances of success are greater when owners put a plan in place early.