Owning a business in Massachusetts in not uncommon. Whether it is a family business that has passed down from generation to generation or a business that was recently established, there are important business decisions that must be made.
These are not always the daily operation decisions, however. Business planning requires an owner to consider various scenarios to ensure the continued success of the business. To adequately plan for a business, one must consider their plans for succession.
Planning for succession
There are many reasons businesses fail to properly plan for succession. One major cause is procrastination. It is hard to consider leaving a business and letting it go to a family member or to another person.
Additionally, it is difficult to face ones own mortality. Whether you continue working until the day you die or seek to retire by a certain age, planning for succession is imperative and taking three steps prior to succession planning could prove beneficial.
- Define your vision for your company: This means a business owner needs to consider how long they want to stay in the business. This could be a certain age, earning amount or other life event. This also requires think about what the business will look like after you leave. Do you want the business to remain with the family, continue operations with an unrelated owner or will you sell the business?
- Identify possible successors: While naming one successor and carefully planning for this successor may be the best step to take, especially if it is a family member that knows he or she will be assuming this role. However, it may be beneficial to name more than one successor in case the first person named does not want to assume this responsibility. The earlier this is established the better, as any issues that might arise could be addressed. This is especially true if one family member believes they should be a successor over another family member.
- Plan for contingencies: This is an important step to take when is comes to family business succession planning. This allows for the business to be protected in unexpected catastrophic events. However, when it comes to contingency planning, an owner should consider the amount of risk exposure they are willing to accept in the matter of an unexpected event.
Succession planning is a major step to take, and it could prove to be a very valuable step to take. Thus, business owners seeking to take this step should understand the process and how best to move forward with it.