One of the many advantages of a small business is its ability to move quickly, adjust, change, anticipate and react. Indeed, a small business can often turn on a dime. The quick reaction time of the business is keyed to the fact that decision-making is consolidated among just a few persons – sometimes even just one person. That flexibility and maneuverability come at a price, however. According to the Small Business Administration, more than 50 percent of all small-business owners are 50 years old or older. What happens if the decision-maker dies or becomes disabled? What if the principal owner wants to pass the business along to others?
Many Small Businesses Lack a Succession Plan
The sad news is that many small- and medium-sized businesses lack any sort of formalized succession plan. This is one of the reasons that two-thirds of all family businesses never successfully make the transition to the second generation. As time passes and “the children” grow older, their interests may not necessarily be aligned with the founding generation. The situation can become even more difficult where there is a divorce or death. Implementing an appropriate plan can lessen the strain, however.
Four Steps to a Successful Transition
Here are four steps toward a successful transition:
Step 1: Clearly Identify the Goals of All Involved
You’ve made the business successful by taking on challenges in a straightforward fashion. Apply that same trouble-solving skill to transition. Clearly identify your goals and have all others in the picture identify theirs, as well. Don’t assume that, just because you have been able to exert power and influence over the affairs of the business, you’ll do the same with others’ future plans.
Step 2: Solidify the Business Decision-Making Process
If decision-making has been one-sided up until now, change the procedure. Don’t do it in a haphazard way, however. Commit to writing the process by which decisions are to be made. Share it with others and get their feedback.
Step 3: Craft a Tangible Business Succession Plan
Perhaps the most difficult of the four steps: Carefully craft the succession plan. Is it to take place over three or four years? Is the transition more gradual than that? What sort of mileposts can be set to judge the success of the plan at intermediate stages? What outside assistance – particular in the form of legal counsel – do you need?
Step 4: Merge That Succession Plan With Estate Planning for Retiring Member
Make certain that your business succession plan is interconnected with your estate plan. They should not be working at cross-purposes. Inter vivos (“living”) trusts and other documents are likely necessary to pull off both the estate plan and the succession plan. Do-it-yourself forms will not generally do the trick.
An Experienced Business Attorney Can Help Share the Burden of Succession Planning
Bolan Law Group. has over 50 years of combined experience providing businesses with quality services throughout the Pacific Northwest. We routinely advise business on all sorts of legal issues related to business operation, including business succession and estate planning. We strive to find simple solutions even to complex business issues. Before it was trendy, we worked collaboratively, both with clients, but also with other attorneys in the firm. In this way, our clients can benefit from the many strengths that our attorneys can bring to bear on an issue. For assistance with any type of business issue, contact us on the web, or call our Tacoma or Puyallup office at (253) 470-2356.