Business succession planning important for Massachusetts business owners
On behalf of William Hunt at Clark, Hunt, Ahern & Embry
Businesses are the driving force behind a state's economic well-being and Massachusetts' is doing well, according to the Executive Office of Housing and Economic Development. Behind every business is an owner or a number of co-owners, each of whom have their own story to tell.
Business ownership can be overwhelming and exhilarating at the same time. No matter what type of industry you are involved in, there are many moving parts to operating a company. Often the day-to-day operations take precedent over establishing long-term goals and - much like personal estate planning - too many owners fail to do any business succession planning.Why have a succession plan?
Business owners who establish a succession plan early on have an advantage over their competitors. Taking the time to plot a course of action throughout the active phases of your business creates a solid footing from which to work when an untimely death, accident or illness creates chaos in your company.
Timing issues are often beyond the control of a business owner. The economy may take a dive, technologies change production techniques and labor needs and key managers may suddenly depart leaving holes that are hard to fill. If you have established a framework from which to continue operating the company, issues that mean disaster for one company may only be a bump in the road for one that is prepared.
Even if you plan to have your family take over the business or you intend to sell the company and retire at a certain date, a succession plan can help you attain those goals.Setting up a plan
Decide now to establish your company's succession plan in the next few months. With 2014 just days away, make a New Year's resolution to meet with your legal advisor and commit your plan to writing. Following are some important aspects that you will need to consider as you develop your plan.
- Choosing a successor: Do not assume that a key employee or family member will be ready, willing and able to take over the helm when the time comes. Intentionally communicate your desires with your family, board members or key employees and take the time to groom your potential successor to assess whether he or she is a good fit for the ongoing business.
- Plan various options: Economics, early retirement or simply changing your mind at a later date should not derail your plans. Create viable options within your vision of the future that account for variations in your long-term goals.
- Valuing your business: Business valuation is not as simple as looking at recent sales of similar companies. While you may have an idea of the worth of your business based on your assets, income and profitability, valuation is a moving target and changes over time. Whether you intend to give the company to family members or sell to an unrelated outsider, habitually maintain and review detailed financial records, utilizing methodology that is most effective for your industry.
Business succession planning is only one of many areas of business ownership that may require the assistance of an experienced business and corporate lawyer. Consult a knowledgeable Massachusetts attorney for all your legal needs.