Tip of the Week: How to Set Up a Business Succession Plan

If something debilitating were to happen to you, could your business carry on? This isn’t a pleasant scenario to think about, but it’s absolutely necessary to have a contingency plan in place for reasons like this. Also known as a business succession plan, if you have a plan in place, then you don’t have to worry about what the future holds, at least, for your business.

Currently, you might feel like you’re at the top of your game and in control of your destiny, but you know deep down that everything can change in a most-unfortunate instant. If you’ve put off implementing a business succession plan, then you’re not alone. According to a 2014 survey from U.S. Trust Insights on Wealth and Worth, 66 percent of business owners haven’t recorded a business succession plan, or even considered one.

This particular survey targeted 680 business owners with a high net worth, having assets that total millions of dollars. With so much at stake, one would assume that these business owners would have their act together and be prepared for the worst. However, for the majority of well-to-do business owners, this just isn't the case.

Here are more interesting statistics from the survey that provide insight as to why this may be:

• 87 percent of high net worth business owners started their business themselves, while 13 percent inherited it.
• 87 percent don’t expect their children to keep the business running when the end is nigh.
• Two-thirds don’t have a succession plan set up. By age 50 or older, that percentage increases to 70 percent.
• Entrepreneurs with financial advisors are twice as likely to have a succession plan as those who don’t.

While every business owner who doesn’t have a business succession plan has their own reasons for putting it off, there is one reason that can likely be applied here: busyness. Most successful businesses became so thanks to the owner pouring themselves into their company, requiring them to be consumed with the day-to-day affairs. When you’re overly-occupied with the here and now, it becomes difficult to find time to prepare for hypothetical scenarios of the future.

Despite the reality of being crunched for time, it’s crucial that you make time to create a business succession plan. Making such a plan for your business isn’t as difficult as you might think. Here are four tips to help you get started with your own business succession plan.

• Make clear accommodations for a family-run business. If you’ve got a business that’s run by your family, and you would like it to stay that way, then you need to specify this in your business continuity plan. Specifically, you will want to look into a familial management system.
• Looking outside the family for support. If you have to look outside the family to find leadership that will keep your business going, then a good place to start is with your current employees who know what it takes to run your company. Or, consider capable business partners who have an active interest in your company.
• Be sure to make clear records of your plan. For whoever you select to take the helms of your business, if something were to happen to you, you need to have your plans clearly recorded somewhere that can easily be found. This will make the transition easy and prevent a whole lot of drama.
• Get a lawyer involved. For such a complicated matter as this, and with so much at stake, it’s best to get a lawyer to draft your business succession plan. Getting a professional involved will ensure that your plan will be airtight.

In addition to having a business succession plan for your company, you will want to have a data backup plan. Without a business succession plan, your company will spiral into chaos if something were to happen to you. Without a data backup plan, your business will experience just as much chaos if something were to happen to your data, only this would be a problem that you will have to deal with. Preferred can help your business with a data backup and recovery plan with our BDR solution.

For more business tips and IT solutions, give Preferred a call today at 708-781-7110... before it’s too late.