A new year often provides an opportunity for business owners to review their goals and their progress towards those goals, to consider whether those goals remain the same, and to make adjustments to the business based on changed circumstances in the market or in their own lives. Small businesses, especially closely-held and family companies, often depend on the hard work and dedication of their owners. It can be difficult for owners to step back from the business, even when necessary. Succession planning, which allows a business to continue operations in the event that the owner or owners cannot continue in their previous role for whatever reason, is a critical responsibility of a business owner. The arrival of a new year may be the perfect time, if an owner has not thought about succession planning yet, to start thinking about it. Here are four steps in succession planning to help small business owners on their way.
Identify the Organization’s Needs. Every business is unique, obviously, so each one will have its own unique needs for a smooth transition in leadership. Some small business owners may designate someone to take over for them, but all succession plans should have clearly-defined procedures for identifying a successor and moving them into a leadership position. If running the company requires a high level of expertise in a particular field, or even professional credentials like a law or medical license, a succession plan should include a process for keeping the business in the hands of qualified individuals. If such individuals are not already part of the organization, the plan should include a way to locate and recruit someone.
Identify Personal Needs. Small businesses often depend on leaders working together, and discord is frequently the cause of a small business’ failure. A succession plan must consider the personalities and relationships of the people who currently comprise the business and, to the greatest extent possible, plan for the continuation of the business with minimal feather-ruffling. It should also consider personal issues like income and estate tax.
Development and Implement a Plan. The plan should take the organization’s bylaws or operating procedures into account, providing as smooth a process as possible for locating and retaining new leadership. The nature of the business and its customers will also affect how to plan for succession. A retail business with a lease on a physical location, for example, will need to continue its operations with little to no interruption, while a business that provides services to a small number of clients or customers might be able to bear a lapse in operations. Implementing the plan should include informing any necessary people whom an owner might designate as a successor, allowing them an opportunity to accept or decline.
Review Your Plan Regularly. The more complex a succession plan, the more often it may require review. Management should conduct an extensive review of the plan at least every two years.
Business attorney Samuel C. Berger represents New York and New Jersey businesses and entrepreneurs. We offer fixed-fee packages of legal services, covering a wide range of issues, to help businesses, business owners, and entrepreneurs understand their rights and obligations, and to allow them to grow and run smoothly. Contact us today online or at (212) 380-8117 to schedule a confidential consultation to discuss your legal matter.
More Blog Posts:
New York Court Rules That a Partner May Unilaterally Withdraw from Partnership That Lacks a Defined Duration or Objective, New York & New Jersey Business Lawyer Blog, September 12, 2013
Winding Up and Dissolving a New Jersey Business, New York & New Jersey Business Lawyer Blog, April 11, 2013
Five Tips for Preserving Your New York or New Jersey Business’ Legacy, New York & New Jersey Business Lawyer Blog, January 29, 2013
Photo credit: By Berdea (Own work) [CC-BY-SA-3.0], via Wikimedia Commons.