Ensuring business continuity should be given just as much thought as other business strategies, but it is often put off or overlooked. According to the U.S. Small Business Administration, less than 30 percent of small business owners have a formal succession plan. Given that 90 percent of U.S. businesses are family owned and less than 15 percent succeed to the third generation, the importance of a succession plan cannot be overstated.
Planning for the future
If you love every moment of running your own business, you may not be thinking of retirement just yet. But have you considered what the future could bring? What would happen if you were injured or incapacitated and required time away from the business? How would your business function?
By focusing only on day to day operations, you neglect thoughts of future earnings and a business exit strategy. Having a succession plan in place ensures your business will be successful as it evolves to meet you and your customer’s needs.
If you run a family business you need to decide if you want it to remain in the family. These conversations can be difficult and tensions often run high. Having a third party involved will take the emotional aspect out of the mix so you can focus on business decisions. Current and future leadership should be involved in the business succession goal setting. Both parties can provide insight as to past mistakes and future growth avenues.
When establishing business goals, make sure to consider retirement goals and cash flow needs for retiring managers. Also make sure to set goals for the next generation of management. The plan should outline who can make business decisions and who will be the successor. A thorough succession plan will also include a timeline and transition plan to use while management changes.
You’ve built up your business, now it’s time to make sure it endures.