75% all American business always has problems with succession and often crashes within the first five years after changing leadership.
What could be the cause of this?
Succession plans for any business that wants to last long and stay from generation to generation should be a serious plan. It may be hard to discuss the topic of death or possible incapacitation but you have to give it a try.
It involves a whole lot of changes, some of them if not properly handled can lead to the demise of the company. Trying to shift authority to relatives as successors is a touchy situation, as it may stir up emotions which may not be too positive; it can lead to management and asset handling crisis.
We know you will love to avoid that, for a smooth succession; here are 4 things you need to know.
- Start the Plans early enough
No time is too early to discuss succession, but it may be too late. Most companies which were owned by families always picked and groomed a successor from childhood. It may or may not work for you, even if the person is not a member of the family. You can never go wrong if you start early.
Draw the person or people closer and teach them the ropes of the business, let them learn while you are still there.
A perfect succession plan takes about 5 years to execute, any delay may not augur well for your business. It is a new phase for your company not the end of it so handle it like a business strategy.
- Choose realistically.
If you want to hand over the business to family, nothing guarantees that it will be the first child. Even if it is not a family, it may not be the longest serving staff. You need to carefully study traits, habits, passions and the business sense of the intended successor.
You don’t want to hand over the business you worked hard to build to someone who feels early mornings are best for sleep. The person should have the business at heart and a desire to see it grow and thrive.
Make your choices based on the strengths and capabilities of the person you have in mind. Put sentiments aside.
- Make it a document
Your words may not be enough to enforce what you want when you are not there. Don’t just say it even if it is in the presence of people. Put it down in writing. Make it a legal and a binding document.
This situation creates an environment for your business to succeed beyond your control. It also lays out what terms and conditions behind the transfer of ownership.
It will also give the incoming successor an idea into what you desire.
- Get Counsel
It’s easy to try doing it on your own, but it is not advised and in the long run, you may find out there are things you should have taken care of that you overlooked. Getting a general counsel attorney is your best bet for a smooth transition.
Issues of management, tax, assets and insurance are best handled by professionals. Save yourself a lot of stress and get one today.
The longevity of your business lies with you. Don’t gamble with it.