Does your business have a succession plan? Is it up to date?
A solid and up-to-date succession plan is vitally important to businesses today. It’s estimated that more than half of businesses fail after the death or disabling injury of a company founder or chief executive. Many family businesses never make it to the second generation due to the lack of a well thought out succession plan. It’s estimated that only about one-third of family businesses survive past the first generation, and only about one-fifth survive to the third generation.
A quality succession plan focuses on what happens after a company founder steps down, especially if the loss of leadership is unexpected. Will a key employee or family member take over? Will the company be sold? Will it be liquidated and the proceeds distributed to shareholders? Many companies without succession plans fail due to internal conflict over who should take over. Others are liquidated because shareholders can’t agree on how best to run the company.
Your financial planner and your insurance agent are two important partners in creating a quality succession plan. There are a number of financial and insurance products that can help make sure your succession plan will be carried out at the right time and in the right way.
When is the best time to create a succession plan? Now. The more time you have for your plan to develop and for the insurance and financial tools to go to work, the better. And don’t forget: Succession planning is not a one-time task. Consider a succession plan to be a living document, one that should be updated annually.
