Mistakes to avoid when it comes to business succession planning

A business succession plan is a vital tool in establishing the wishes of an owner and protecting a company’s future.

If you run a business, you can best preserve your legacy by avoiding the following common missteps when it comes to your succession plan.

Mistake #1: Failing to do it

It is easy to put long-term plans off indefinitely – particularly when you are under the stress and obligation of running your business.

However, putting off making a business plan leaves your partners, family members and employees vulnerable to costly, contentious conflicts when determining what to do after your exit from the business.

Mistake #2: Picking the wrong successor

Choosing a successor to take over your responsibilities is not an insignificant decision. You will want to think about:

  • Who can maintain some stability during the transition
  • Who shares your same outlook for the business
  • Who is capable of taking over the responsibilities
  • Whether your successor is willing to carry out these duties

If you pick someone who does not fit the necessary criteria, you can set your business up for uncertainty, disruption and potential closure of the company. 

Mistake #3: Keeping the details to yourself

There may be no reason to disclose the details of an estate or succession plan with everyone in your life. However, failing to discuss your goals – even in a general sense – with your business partners, family members or potential successors can be a costly mistake.

You are not the only person affected by leaving your business. And when you do not give some idea of what others can expect, you leave the door open for unanswered questions and bitterness, hurting those you care about the most.

Mistake #4: Leaving out crucial components

Business owners dedicate incredible resources to their businesses, from their personal finances to their time and attention. And after all the work they put into it, owners should understand the impact their exit will have on the business.

The best way to do this is to work with a lawyer to create a comprehensive plan that addresses personal, professional and financial elements of succession. Leaving any of these components out can have unexpected and unfortunate consequences.

Making your plan work

When you avoid these mistakes, you can be confident that you have a business succession plan that works for you, your business and the people you care about most.