Often, entrepreneurs are so engrossed in planning for commercial success that they fail to take the time necessary to create a succession plan for the business. According to a 2010 study by the Cameron Research Group, 32 percent of business owners who planned to sell their business within the next year had not considered succession planning. A recent article discusses the importance of succession planning for all businesses.
According to succession firm Time Advice, Andy Gowers, “Succession planning defuses the time bomb ticking in your business. Everyone exits at some point; it is just a matter of why.” Gowers suggests that firms create sophisticated succession plans, and utilize a team of decision makers. This team usually includes an attorney, accountant, project manager, and financial planer.
According to succession planning expert Leigh Riley, too many business owners believe that they can simply put their business up for sale when they are ready to retire. According to Riley, however, this outcome is often not successful. As Riley explains, this is because “financial institutions aren’t lending the way they used to for business acquisition, so willing buyers can’t find the funding, which forces business owners to compromise on price.”
Once a succession plan has been put in place, it is important to update it every few years, and whenever significant changes occur in the business. A business succession plan should be a fluid document that grows and adapts along with the business.