For many small business owners, the term "succession planning" can mean the idea of passing along your business to a family member or friend. In reality, succession planning is about finding the right strategy to hand over your business to someone else. One way to define succession planning is to think of it as a process in which the business owner plans for the transfer of knowledge, skills, labor, management, control and ownership of a business to the next generation.
The task of choosing and preparing a successor for your business can be a difficult process. The task of finding and training your successor can be challenging for a business owner but it is an essential element of a successful succession plan.
Your succession plan should contain the following:
- A statement of the distribution of ownership
- The identity of the new leader or leaders
- How the new leaders are to be trained for their roles
- A definition of the roles of other key members of the business during the transition
- Mechanics for the purchase or sale of stakes in business
- Taxation and legal considerations
- Financial considerations
- Retirement considerations
- A procedure for monitoring the process and dealing with disputes and problems
- A timetable
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