Four out of ten small-business owners have a succession plan–the rest may fly blind into their golden years.1

Whether your business is relatively new or you’ve been at it for decades, you should have a vision for its future to the very end–the point at which you hand over leadership to your chosen successor. That calls for a well-laid plan, created with the valued input of your closest colleagues and your professional advisers.

One size does not fit all,

As you get started on a plan, keep in mind that no two succession plans are exactly alike. A firm’s size, its organizational structure, family involvement, and its leader’s desired outcome all inform its strategy and tactics. Consider these hypotheticals:

Case 1: You’re the sole proprietor of a thriving local tax-return prep business founded as a limited-liability company (LLC). On May 21, 2029, the day after you turn 65, your only child will assume ownership. Since you have a minimal corporate structure, a straightforward organizational chart, and a clear successor, your plan will be relatively easy to execute.

Now let’s change some details:

Case 2: Your business is an S-Corp with a minority partner and ownership of shares. Here, the planning gets more complicated: Will your partner buy you out when the time comes? Must your partner agree to your designated successor? Who will calculate your share value, and on what basis?

Steps to succession

If you’re headed into a potentially complex transition, consider bringing in a lawyer with a proven succession-plan track record in your field. A lawyer can help you with potentially difficult issues such as succession within a partnership, share valuation, and even more sophisticated conditions. But in any case, the following universal steps can support your action plan:

Step 1. Identify your successor. Will a family member, a key employee, or an as-of-yet unidentified new owner take the helm? This decision sets the stage for the rest of your strategy. For instance, if you need to conduct an internal evaluation process or do an outside search for a successor, you and your team must establish selection criteria for best results.

Step 2. Establish your post-ownership role. Will you want to be an adviser or let go of your connection entirely? Once you choose your successor, bring them into this discussion.

Step 3. Choose your advisers. Your transition planning should include your lawyer and accountant, as well as your financial adviser. This trio will provide advice and counsel throughout all succession stages on such issues as the tax consequences of your plan and the optimal sale terms for your retirement. As issues arise, you can expand this brain trust to include specific advisers in real estate, eldercare, or leadership coaching, as needed.

Step 4. Document important operational systems and processes, including financing of the business purchase, if this applies.

Step 5. Set a timetable to document the actual transition of leadership to your successor and to review overall progress.

Step 6. Create a communications plan to put forth your plan to your employees, business partners, and customers. No matter how great the plan, if you fail to communicate its benefits clearly, it may fail. Leave no room for ambiguity, misunderstanding, or erroneous inferences.

It’s a living thing.

The best succession plan is a living document, subject to revision as your business grows and its needs evolve. A plan that made sense last year might be out of date 10 years from now. But with periodic review and revision, you’ll stay on track.

Want some additional inspiration? Check out these sample business succession plans, and the Small Business Administration’s comprehensive guide (PDF) to succession planning.

Get started.

An M&T Business Banking relationship manager can discuss your business succession plan and assist your strategy. Visit a branch or call 1-800-724-6070 for more information.




This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.



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