Whether choosing to pass a business to a successor or sell to a third party, North Bay business succession experts agree that there are a number of elements that should be up-to-date and updated throughout the life of the company.
Every company is unique, and individual plans and goals will differ. Professional help can highlight and manage some of the key concerns to orchestrating a smooth transition that remains profitable for the owner and the company after retirement.
Here is some of their advice:Clean up ownership issues — In the unexpected exit of a top executive, not knowing how to distribute the company stake that is left behind can cause a huge headache for other co-owners. A buy-sell agreement can help simplify and automate the fallout by distributing that stake appropriately. Some companies may already have a buy-sell agreement, but consultants in the field caution that many could be outdated and refer to owners and arrangements that are no longer valid.Consider the current financial climate—Those who developed a succession plan long ago might benefit from reconsidering it amid the current financial climate. Passing assets to a successor or seeking a third-party sale both carry benefits and costs that evolve with changes in tax rules and economic conditions.Start early—Studies and anecdotal evidence show that most executives either lack a clear succession plan or have not devoted enough time to building a fully considered strategy. Every company is different, but the heavy lifting for a comprehensive plan can take from six months to a year.Don’t forget the company—In many cases, the survival of the company beyond its parting executive is essential to fund the revenue stream for their retirement and their family. That survival includes having a plan for filling c-level positions after an unexpected exit, since leaving that chair vacant for too long can reflect poorly on the company.Let your successor know—Arranging for an overlap period after identifying a successor can have a transformational effect on the chosen person. Grooming them for the role is one thing, but the knowledge that they will one day ascend to a top role can inspire leadership behavior early.Stay up-to-date--A succession plan is an ongoing process, and planners recommend that executives keep it updated to both maximize its effectiveness and sidestep problems that might have developed since its creation.