Running a successful small business is a challenging endeavor. An owner or entrepreneur typically needs to learn all about the daily operations of the company. They need to develop a relationship with employees and pliers and a deep understanding of the history in which the organization operates. Understandably, many small business owners view the company that they run or founded as their most valuable asset. They may want to pass it to their children as part of their legacy or ensure the company’s continued operation after their death, incapacitation or retirement for the benefit of the community and their employees.
When someone cannot do their job anymore, the company they help operate is at risk. Their absence could cause numerous operational challenges, and other people may struggle to fill their role without support. A succession plan is key to ensuring a smooth transition and continued operations when someone in a leadership position steps down.
What is a succession plan?
Most business owners and executives should consider developing a succession plan. A succession plan is a document describing how someone can take over an owner or executive’s role. A succession plan may outline the exact job responsibilities that someone fulfills, including those not readily apparent to others. Solid succession plans typically also detail what would be necessary for another party to take over that position. Succession plans may include details about the educational or experiential requirements for a replacement. Other times, individuals may nominate specific people to take over their positions at a company.
In theory, a succession plan should allow an organization to transition to a new owner or manager without any significant disruption to company operations. A corporate board or a replacement candidate should be able to keep the company operating smoothly using the details included in a succession plan.
Some business owners engage in succession planning as part of their personal estate planning process. Others integrate succession planning into the promotion procedures at their company so that anyone in a key position has a succession plan in place. Either way, thinking about the future of an organization, and seeking legal guidance accordingly, can help someone preserve the business that they created or helped develop even after they are unable to continue operating that company.