Creating an organization or starting a business takes a lot of hard work, financing, and patience, but the result is often worth the sacrifices. Once your large company, small business, or organization is flourishing, you need to select a person you trust in the event of your retirement or death. Transferring ownership to a person of your choice is known as business succession planning, and below you can find information on how to do it correctly, brought to you by the professionals from Altra Insurance Services, a premier provider of business and commercial insurance San Diego business owners trust for high-quality service and reliable coverage.
Starting the Plan Early
Start the planning process early. Without a good succession plan, your family may be forced to sell the company if you’re unable to make sound decisions. A business succession plan can ensure your finances and the company’s legacy are protected. The details included in this plan determine how you intend to manage, sell, or transfer the business once you retire or at the time of your death. While it may be hard to think of writing out a succession plan, having the conversation now gives you more flexibility and prevents your family or successors from being in a problematic situation down the line.
There are typically four stages to a business succession plan: initiation, selection, education, and transition. Your potential successors should learn all they need to know about the business in the initiation stage. As a business owner, you should be honest and realistic at this time. The selection stage is next, and this is where you officially choose your successor. After you’ve selected, the education/training phase begins. You’ll have the opportunity to evaluate your successor’s decision-making skills, leadership abilities, and performance under pressure. If you’re still satisfied with your choice, you can draw up the paperwork and make sure it’s legally binding. The transition stage comes once you retire or upon your death.
Choosing a Successor
Most business owners choose to pass their share of a company down to children or business partners and associates they trust to take over. Regardless of who you transfer the company to, make the decision as soon as possible. One quality of being a good business owner is having all your legal affairs in order. When you choose a successor, take into consideration the age of the person you select, his or her strengths and weaknesses, and his or her desire to take over. Although there can be negative emotions within families when specific children aren’t chosen, your main priority is to pick the person best suited for the job.
Even if you’ve done research and have business succession planning expertise, hiring an agency to complete the process is beneficial. The representatives will help with legalities before you choose a power of attorney and write out your wishes, which can prevent you from compromising your monetary compensation or transfer wishes. Once the business succession plan is implemented, you can rest easy and start planning your retirement.
In addition to succession planning, one of the smartest steps you can take as a business owner is to purchase business insurance. If you need reliable, affordable insurance for your business, turn to the professionals at Altra Insurance Services. Our service is second to none, and we provide a wide variety of insurance products, including homeowners, renters, and auto insurance. San Diego business owners should give us a call at 619-474-6666 for a free quote.