Succession planning is the process for determining how your business should continue after you retire or pass away or if something happens and you can no longer run the company. Even if you have a family-run business, you still need a formal succession plan to protect the company and minimize disruption. Here’s a look at some succession planning tips and pitfalls to avoid.
Succession Planning Tips
A smooth business transition often comes down to careful planning and clear communication – here are some tips for moving forward.
- Establish the core objectives
First, set definitive goals. This typically means drawing up a plan which considers matters such as the company’s future direction, staff retainment, tax liabilities, and asset management. Having a clear strategy helps to ensure a smooth transition from the outset.
- Begin planning early
It’s never too early to start succession planning. Remember, you’ve invested significant time and energy into building a successful business. Integrate succession planning into your overall long-term business strategy to ensure you’re making decisions in the company’s best interests.
- Communicate with your family
Give family members a voice in the succession planning process, especially if you plan on asking them to take over the business or assume another related responsibility. Communicate decisions clearly, but bear your family dynamics in mind – everyone should know that their opinion matters.
- Anticipate areas of conflict
In family-run businesses, there’s always a risk that someone may be disappointed if, for example, they won’t receive a leadership role or take over the company as quickly as expected. By anticipating which decisions may cause conflict, you can adequately prepare for how you might mediate the situation.
Succession planning pitfalls to avoid
To make any family-run business transition as stress-free as possible, here are some mistakes to avoid.
- Planning for the short-term
As with any business decision, it’s important to consider the long-term implications of your succession strategy. If you only focus on immediate or short-term concerns, you may make reactionary decisions that hinder the company’s growth in the long run.
- Being secretive about the process
By keeping family members informed, there’s less chance of individuals feeling disappointed, confused, or frustrated by your succession plans. Being secretive around matters, such as who you plan on giving leadership roles, can lead to otherwise avoidable misunderstandings or future disputes.
- Trying to go it alone
To avoid emotions clouding your judgment, it’s best to hire a succession planning or business attorney at the outset. A lawyer can guide you in creating a succession plan based on your goals, and they can help you find ways to minimize disputes between family members.
How our Sioux Falls business lawyers can help
Every family-run business needs a clear succession plan to help to protect its future. Whether you’re thinking about succession issues for the first time or you need help with an existing plan, our business lawyers in South Dakota are here to help. Contact Ogborn Mihm Quaintance, PLLC at (605) 432-8900 or reach our team online to arrange a consultation.