When you’re the owner of a successful business that you have grown over the years, succession planning is one of the most difficult transitions you’ll experience. You’ve poured years or decades of your life, and possibly your family’s time as well, into creating your company. And planning to hand ownership and control over to a family member, an associate, or to a buyer can be difficult to initiate.

But successional planning covers more than just business ownership – there are also several other considerations at play. This article will take you through all five aspects of succession planning you need to think about before it’s time to retire or step down: business, personal, management, ownership, and estate planning. Let’s dive in.

Business Financial Planning

Financial planning for your business is a forward-thinking and analytical process. It involves forecasting your anticipated future results while managing costs. It also includes determining how to use your company’s financial resources to hit your short-term and long-term goals.

Business financial planning is an important part of succession planning, because you won’t know how to plan for the future of your company if you don’t have at least some idea of where it’s currently headed and how you’re planning to achieve your business objectives. Your successor(s) will also need to know where the business currently stands before they take over if you want them to be successful – any debts, upcoming issues, liabilities, and profits should all be clear in your business financial plan.

Personal Financial Planning

Personal financial planning is also a vital part of the succession planning process. You will need to have a clear view of where your personal finances stand before you begin thinking about retirement savings and plans. You will also want to look at how various succession options will affect your current and future tax burden and your future plans.

If you don’t think ahead about these issues, like how the sale of your business could affect your retirement savings and taxes, you may be in for an unpleasant surprise down the road. For example, do you really have enough money to retire on the proceeds of a sale of your business once you factor in taxes, or should you look at alternative options?

Management Succession Planning

When you’re developing your succession plan, one of the most important things to think about is who will manage and run the operations of your business after you step down. This is critical to the continued success of your business after your leadership. If you want your business to remain profitable and continue to develop and grow after you’re no longer its leader, this is your most important decision to make during the succession planning process. This decision will significantly drive the value of your business.

You may want to hand over management to a family member who has been working in the business for years and has experience, or to a trusted associate who has been by your side as you run the company. You may, of course, also want to sell the business to someone else and leave the management decisions up to them. Figuring out which option is best for your business is vital in this step, above any considerations about the feelings of the family. The health of the business is at stake and that needs to be the top priority when picking a manager.

Ownership Succession Planning

While many business owners assume that the person owning the business and the person managing it need to be the same (because that’s how they did it), the reality is there are several other options to consider. This is especially important for family-owned businesses, because the next generation may not be as interested or experienced in running the business after you.

You can maintain your ownership of the business and pass the task of management on to someone else. You can also divide ownership among family members in a few ways, like having both voting and non-voting shares. This helps your family benefit financially from the business you worked hard to build while leaving the day-to-day management in the hands of the most capable and interested people. 

Estate Planning

This is the most overlooked area of succession planning for most business owners. After all, it can be hard to see how your estate planning and succession planning overlap. But many elements of planning to pass your business along to the next generation impact your estate planning too.

For example, dividing up the ownership of your company among your heirs and family members or selling stock in the business has tax implications not just for your business, but for your personal estate as well. And if you should fail to plan for your succession and be forced by illness or even death to suddenly transition company ownership, that will also have serious consequences and tax obligations on your personal estate you may not have planned for.

Key Takeaways

There are many aspects of succession to consider when you’re thinking about your exit strategy. While it’s advised to begin the planning process years before your planned retirement date, it’s never too late to start. And getting the right help can make the whole process easier and ensure you’re avoiding mistakes that can cost you and your family significant money and time.

Hiring a team of skilled professionals, including a CFP, CPA, attorney, and valuation consultant can get you ready for the retirement of your dreams without the stress and hassle of doing it yourself. 

Succession Planning with Bartley Financial

After growing up working in his family’s business, Robert Bartley now uses his personal business experience and financial acumen to guide other business owners in Andover, MA and Bedford, NH toward their most successful futures. He and the rest of the Bartley Financial team coordinate your business and personal goals and, in the process, enhance your business’ attractiveness to employees when you need to hire and buyers when you want to sell.

Bartley Financial’s fee-only structure ensures that your costs are forecastable and unencumbered by commissions or other hidden, fluctuating, and unpredictable charges. Business owners are then able to focus instead on what really matters: the success of their small business.

If you’re looking for a fiduciary financial advisor who can guide you through the complicated process of succession planning, contact Bartley Financial today and retire knowing your legacy is safe.