Business succession planning is incredibly important for the future of a business. If you own a family business, it may also be quite important for your family’s financial outlook, as you may view the business at least partly as something that you have built specifically for them. You may want to pass the company down accordingly, because it can provide both income and economic opportunities for your family for years to come.
As such, you certainly don’t want to make any mistakes in this process. It is important to understand some of the more common mistakes that people make when engaging in succession planning so that you can avoid them.
Only addressing certain employees
You may want to create a very comprehensive business succession plan that addresses all aspects of the business, rather than a plan that only focuses on executives – who may be your family members. This doesn’t mean that the same level of detail or planning is required for every employee, of course, but you’ll want to have some idea of what this process will mean for their employment status and what role they will have as the company changes hands.
Poor communication
It is very important to work with your team and communicate your goals and your vision, along with the steps you plan to take to get there. Everyone needs to be on the same page and you may need to answer questions or address concerns. This is why it’s often best to begin business succession planning years before you intend to pass the business on to the next owner(s).
Missing talent
Another potential problem that can arise is that a business owner may overestimate the talent at the company. This is especially problematic with family businesses, wherein an owner may simply assume that an adult child will be able to run the business as well as they did. But this is not always a guarantee. Business owners need to make sure that everyone involved in the new leadership group truly possesses the talent and abilities to be successful. Moreover, the individual should want to take over the business and assume the vast responsibilities that come with such a role change.
Once again, you do not want to make any mistakes that are going to cost your family money or that may even put the future of the business in jeopardy. Be sure you know what steps to take as you move forward and seek legal guidance whenever necessary.
