Creating a Business Succession Plan
Business development is an ongoing process; it takes a lot of time to set up your business. But once everything is almost settled it might be time for you to settle down and hand over your business to a successor and enjoy your retirement life. If you are near retirement, choosing a successor is one of the important tasks, but it is always better to have a succession plan worked out in case of your sudden death. Here are some tips to create a business succession plan.
1) Picking Successor: You might want someone to continue with your business after your death or retirement. It is a difficult task to choose someone to take up your family or dream business to the next level. You can choose someone from your family to be your successor but it should be a thoroughly thought decision. You need to consider all the strengths and weaknesses of the successor and see if the person is suitable to take the business to greater levels. It might be difficult and heartbreaking to handle others who were not selected to be the successor, so overall it can be an emotional decision too. The business partners also need to approve of this successor if you are not the sole owner of the business. The successor should not only understand your business correctly but also fit in your shoes, for this he must be aware of all your business deals, investments, and other options. Continue reading to know more about some simpler investment choices.
2) Life Insurance: Another way of choosing a succession plan is using life insurance. It is usually very useful if the business is done with partners and the business suffers sudden death of one of the partners. In such case, the insurance cover for the deceased partner can be distributed amongst other partners to take over the business. There are many ways this can be handled depending upon the number of partners. If there is less number of partners they can choose to have cross-purchase agreements where each partner can have an agreement with each other. But in the case of many partners, it is better to have entity purchase agreement where the business itself is the benefit and owner of the policy.
Conclusion: It is important to plan out the succession plan when you start the business, not only for the business to flourish further but it is important for the clients too. The partners might also want to continue working in the business even after losing one of the partners. So creating a succession plan is an important factor in business planning and should be done considering all the options.