You’ve worked long and hard to build your business. Building a business succession plan is essential to achieving your goals down the road. Learn more about planning strategies, factors, and considerations.
Succession planning considerations
- Timing: A plan should start taking shape years before your departure or change in role and involves building a transition team. With your eye on maintaining company strength, a good plan will help guide ongoing operations: hiring, employee retention, and more.
- Personal goals: You've worked hard for a payoff that will allow you to finance your next venture, whether it's a new business, charitable foundation, or other goal.
- Family financial security: Some family members may be critical to succession; others will not be involved. Achieving fairness for everyone can be complex. Transition can be controversial, but there are ways to help improve communication and minimize disagreements and power struggles.
- Risk management: Even for companies with substantial assets and loyal customers, lack of liquidity can impair the transition process. A good succession plan accounts for this, allowing wealth extraction while helping to keep the company vital in a competitive market.
Selling vs. keeping your business
A critical succession issue: keep the business or sell? Here are some factors to keep in mind as you look to select trustees and successors.
Keep the business in the family
The hand-off process can be complex. A solid succession plan can help affluent families secure their wealth for successive generations. This may include mutually beneficial, tax-efficient strategies for selling or gifting the business to heirs.
The big question: who gets the job? A critical component of a successful transition is getting successors in place. If several family members are involved, sorting out the reporting structure can be nuanced. Effective communication during the succession planning process will help clarify expectations and responsibilities.
Sell to outside buyers
Sorting your options takes time. You may have many options, including an Employee Stock Ownership Plan (ESOP), an outside sale, or an initial public offering (IPO). A succession plan considers the needs of the business, the dynamics of the market, and your personal goals.
Prepping for sale has many dimensions. Proper valuation of your company is a vital succession planning strategy tool, and a transition team will help make an objective assessment. As transition approaches, the successor must be groomed and your role clarified. During this period, talent retention becomes critical.
After working long and hard to achieve success, a good business succession plan can help you prepare for the next phase of your life. There are many options available and decisions to make, so the sooner you begin, the more likely your plans will come to fruition.
The complexities of a business succession plan require the guidance from a team of experienced professionals, including a Huntington Private Bank® Advisor. To learn more, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank Office near you.