Succession planning plays an instrumental role in readying employees for advancement. These methods are often referred to as ‘grooming’ employees, but the reality is these methods are vital for a company’s overall success.
Companies that don’t engage in succession planning may find their self in challenging situations if key personnel leave their position. Bringing employees up to speed to fill the role often results in delays and financial losses.
As a business grows and expands, owners need to identify employees that can be promoted into key positions. Owners should always have a ‘right hand man’ around that could take over business operations at any given time.
Furthermore, an employee should be in training to assume the right hand man’s role. Cross-training and internal promotions help companies remain strong through adversity and expand the enterprise more quickly and efficiently.
Owners that take time to build a successful company need to make use of strategic development plans to ensure the company will continue to thrive. Planning prepares the entity for loss of key employees and positions it for expansion opportunities that come along.
Another benefit of business succession planning is it helps to retain superior employees. When employees know they are being groomed to fill a key position they are motivated to deliver top performance.
Business succession planning is essential for family operated businesses. Transferring ownership of the business to relatives goes hand-in-hand with estate planning. The type of planning depends on how the company is owned and what should happen to it when the owner passes away.
If a business owner has children or a spouse that are not part of the business, he must decide if he will pass the entity along to heirs or have it sold and disperse proceeds to heirs.
Transferring a business to family members involves tax liabilities which are sometimes as high as 50 percent of the value of the company. It’s important to engage in estate planning strategies that can reduce estate tax liability, such as transferring assets to trusts.
Succession planning for small business involves developing a plan to transfer ownership of the company in the future. This type of planning identifies the person that will manage the transfer, along with establishing plans that address cash flow and tax liabilities.
Small business succession planning involves many facets that are ongoing throughout ownership of the company. Owners need to act as a mentor to the people that will take over the business and share the concepts that make the company successful. The goal of this type of plan is to make certain every element is taken care of so the company will continue to thrive when the owner leaves.
Any time a business is transferred it is taxed by theIRS. Therefore, plans need to be established to account for the tax liability that will take place. Strategic plans also need to be created to ensure sufficient funds are available to cover business expenses such as court filing fees and legal expenses.
If you have a succession plan you are ahead of the game. However, having a plan doesn’t do any good if you aren’t using it. At Craton, Switzer and Tokar, we help owners develop business succession plans to ensure their company can carry on in their absence. We also help business owners safeguard their business and personal assets through estate planning.
If you’re a business owner that is ready to engage in success planning we encourage you to contact us to setup a consultation. We also invite you to learn more about asset protection, business law, and estate planning at our succession planning blog.