If you are a business owner, you’ve invested time and effort to build a business that supports your family and many others including employees, vendors, customers and your community. Whether it’s a few years from now, decades away or tragically unexpected, there will come a day when you aren’t running your business at the intensity level and vigor you are today. Succession planning should be part of your overall business plan and your personal financial plan. After all, the three go together. Consult with financial, legal and tax advisors as each brings a level of expertise to the planning discussion. The following six steps are essential to successfully transfer your business and protect what you have worked hard to build.
Whatever stage your business is in — whether you are planning to leave your business soon or years from now — start thinking about business succession planning with these six key steps in mind.
STEP 2. CLARIFY YOUR GOALS. Before you build your plan it’s important to think through some strategic questions that will bring focus to your short- and long-term goals.
STEP 3. BUILD YOUR PLAN. Think about who you want to take over the business and how you want the transition to happen. Then, work with your business succession team to consider strategies to transfer the business.
STEP 4. MANAGE YOUR RISK. A strong succession plan should take into account risks that could derail the plan.
STEP 5. VALUE YOUR BUSINESS. Depending on whether you have chosen to maximize or minimize the value and what strategy will best meet your goals, when it comes time to implement your plan, it’s likely you will need a more formal valuation.
STEP 6. REVIEW YOUR PLAN. You will want to review your business succession plan yearly for changes in your situation.
Jay Hatten is a wealth management advisor with McBee Avenue Wealth Advisors, which is affiliated with Northwestern Mutual. Hatten, who is a third-generation Northwestern Mutual advisor, helps successful business owners, executives and professionals connect their vision, values and goals through a detailed financial planning process.