Even with exceptional people in leadership roles, business owners still worry about the day-to-day operation of their organization. They also consider the future of the business and how new leadership of the company will run the office after they’ve left. For this reason, experts encourage a business owner to develop a comprehensive plan that accounts for who will succeed them when they leave the organization.
Many people liken the succession plan to the estate plan and attempt to handle both sets of documents at the same time. While business succession can be handled in concert with a will, trust or powers of attorney, it is wise to see the processes as two separate entities.
- Crucial elements of the estate plan: Several documents, each performing a specific function toward the overall goal, make up a comprehensive estate plan. A will, for example, allows an individual to carefully explain the distribution of his or her property. From the family home to a prized book collection, an individual can decide upon who gets what when. Additionally, the estate plan can also include various trusts, powers of attorney and other material designed to reduce familial friction and unnecessary disputes in the future.
- Crucial elements of a succession plan: The business succession plan should examine the future plans of the organization and lay the groundwork for who should occupy leadership roles in the company. Further, the succession plan should examine any strengths, weaknesses and training opportunities for the employees could work on before accepting another position within the company. Additionally, the business owner can include a transition plan to aid the new managers as they accept their new roles.
Too often, business owners view a succession plan as simply identifying the individual who will take over. The plan is far more detailed than that.
Both plans are “living documents” in need of revisions and updates. The estate plan should be reevaluated after every significant life event such as a change in marital status or the birth of a child. Business owners should update the succession plan regularly, however. These updates should account for new hires, employee attrition, recent training and recent promotions.