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Understanding succession planning to ensure business success

Running a successful business is not only a matter of attending to the needs of the moment and the coming year, as any business owner can tell you. Ensuring the success of a business also entails planning for its long term success. This includes passing the business on to appropriate individuals once one is gone.

Succession planning is a unique area of expertise, and it isn’t always the case that successful business owners fully grasp how to go about it. There are a variety of misconceptions among business owners regarding succession planning, and it can be helpful to look at some of these in laying out the general principles of succession planning. Here we’ll look at several of these. 

One misconception is that succession planning is basically for the good of the business owner, and that it is a lot like retirement planning. This is a mistake, because business owners need to look not only to their own good, but to the good of the business and its clients. While retirement planning is about one’s personal interests, succession planning is geared toward the good of the business and its success.

Another misconception is that succession planning is only about the business owner’s transition out of the firm, which is sometime off in the future. This is wrong because effective succession planning actually sets up ongoing policies and practices which situate the business to be able to make a smooth transition when the time is right.  

A third misconception, for those looking at selling their business, is that selling doesn’t take much work and that it is okay to guess as to the value of the business. In reality, selling a business should be a process in which one looks to ensure the needs of clients are met. This means a lot more than making sure they are referred to a new firm to have their needs met. In terms of appraising business value, it important to be accurate so that one has a clear idea of the value of the business when it comes time to sell.

Business owners should not hesitate to work with an experienced attorney in succession planning. Doing so ensures that their transition out of the business will go smoothly and that it will be for the benefit of both the business and its clients.

Source: Wealth Management, “Four Misconceptions About Succession Planning,” John Anderson, September 22, 2014. 

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