How to Create a Feasible Retirement Succession Plan for Your Business

As you will retire from your business someday, it is prudent to have a good succession plan in place before you approach your retirement date. This plan will guide the business stakeholders on aspects such as who will take over the business, how the successor will handle the changes in the business, and how the new stakeholders will share responsibilities. It can help prevent disputes among the successors.

The Importance of a Business Succession Plan

Over 5 million businesses in the U.S. are family-owned. This represents about 90 percent of all U.S. businesses. For most family-owned businesses, the ownership usually remains within the family unless the members decide otherwise. For an easy transition process, the owner should have a succession plan, which also applies to non-family-owned businesses. A business succession plan helps in the following ways:

• Assures continuity of a business and its legacy
• Ensures easy transition from one management to another
• Lowers chances of business interruptions
• Saves time

Tips to Choose a Business Successor

Statistics indicate that only about 3 percent of U.S. family-owned businesses make it to the fourth generation and beyond. The successors chosen for each generation play a key role in the success or failure of the businesses. Therefore, it is crucial to choose a suitable successor for your business before retiring. To select an appropriate successor for your business, use these tips:

• List the qualities of the successors you want for each role
• Visualize where you want the business to be after your exit
• Evaluate a person's abilities, skills, and attitude towards the new role in the business
• Ensure that the person in the picture is willing to take up the role
• Analyze that person's character, work ethic, and general life skills
• Interact with the potential successors and understand them better

The Process of Creating a Succession Plan

• Identify positions that need a successor and choose your provisional successors
• Create a timeline within which your preferred successors will take up the responsibilities
• List the responsibilities, requirements, and what you expect from your provisional successors and any other eligible party
• Evaluate your provisional successors and determine their competency levels
• Thoroughly evaluate your draft succession plan
• Make the necessary adjustments to your retirement succession plan depending on the evaluation results
• From your list of provisional successors, choose the most qualified ones
• Prepare your business for eventualities by purchasing the right business insurance coverage

If you need help coming up with the best retirement succession plan, consult a professional that understands the matter extensively. This will significantly simplify the whole process and make succession smooth.

The best retirement succession plan for your business should include purchasing the right business insurance. The team at Reata Insurance Group is here to help you navigate your way to a reliable insurance policy. Located in Lakeway, we help Texan business owners. Contact us today for more information.