Whatever your business size, succession planning is key to maintaining your legacy. Our short video examines three questions to ask while succession planning.
Whether your business employs a few people or a few hundred, you’ll eventually have to think about succession planning. If you’re unsure where to start, we’ve laid out three questions to ask yourself during the succession planning process.
As you go through the succession planning process, its natural to have questions and make sure your business will be left in a good state. Reach out to a business banker today for help regarding your succession plan.
Readers should consult their own attorneys or other tax advisors regarding any financial or tax strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
No matter the size of your business, having a well-thought-out succession plan is essential to maintaining a business’s legacy. It also helps ensure that the transition meets your objectives, whether that’s cashing out, or transferring ownership to your family, partners or management team. However, 58% of business owners don’t have a succession plan in place. If you’re one of them, here are three questions to get you started.
What’s your time horizon?
If you plan to exit the business within the next few years, your top priority may be finding a successor, which may be a family member for a generational business. If you’re considering a sale, your focus may be on maximizing your return. If you have a longer time horizon, you may want to outline your long-term goals. This allows you to define your vision for the business, no matter how long you choose to remain there.
What happens after you leave?
Some succession plans allow the owner to continue to have a say in key business decisions. For example, an Employee Stock Ownership Program lets you sell off ownership equity all at once or little by little, depending on your preference. Maintaining an ownership stake gives you some level of control even after you leave. If you’re not concerned with maintaining control, a straight sale of the company and its assets can be less complex than a gradual transition.
What’s your desired compensation?
How you get paid can differ depending on the succession plan you establish. You may desire immediate compensation. Or, you may be in a position to be paid gradually, over time. The fastest way to get paid is by selling the business outright to a buyer who can pay you in cash. If you don’t require an immediate payout, other options may be more appealing. A management buy-out allows you to keep your management team in place. If you’re able to offer long term financing to a buyer, you’d be paid in installments, with interest.
Having a succession plan in place protects you and all that you have worked to build. To get started, talk to your banker, attorney, financial advisor, or your local Small Business Development Center. And for more ideas to help make your business successful, visit Santander Business First at businesshub.santanderbank.com
Have a question about this article? Ready to realize the big potential for your small business? We can help.
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