When individuals are asked if they've drafted a will, they often say that they haven't because they don't want to plan for their death while trying to live. If you ask a business owner if they have plans for the future of their business, they'll likely tell you much the same. Your lack of planning for the future can cause your loved ones added stress and grief upon your passing if these issues aren't addressed.
According to American Management Services, Inc., only about 30 percent of all family businesses that are started last long enough for someone to pass it on to a second-generation owner. Even if it does stand the test of time, the founder's attention is often so focused on running the company that there's never any opportunity for them to think about what would happen to it if they were to retire or suddenly pass away.
One recent Forbes magazine study tackled just how crippling it can be for a business owner to die at the height of a company's success. Researchers found that 17 percent of a staff generally leaves, sales decrease by up to 60 percent. The business survival rate decreases to 20 percent.
The most critical aspect of succession planning is for you to identify your successor. By doing so early on, it will allow you to gauge their interest in taking on the role, let them know your expectations of them, set a transition date and know how long you have to show them the ropes. Identifying a successor early on will also give your family and other stakeholders confidence in knowing that you've planned for the future.
Business succession planning is so much more than just identifying your successor, deciding when they'll be stepping in and training them, though. You may have to draft buy or sell agreements, transfer real estate and establish a new business entity as well. A Newport Beach business succession planning attorney can protect your interests and ensure a smooth transfer of your company's assets.