When should you start to plan on how to handle your business when you are ready to retire? Now, say industry experts. Most small business owners are very caught up in the day-to-day running of their business and planning for retirement is hard to prioritize. But the succession of your business is complicated and to make it go as smoothly as possible, you must have a plan. A succession plan is an organized process that goes into effect should a business owner become disabled, retire or die unexpectedly, so a good plan can help prevent bad feelings within the family or between partners. It will actually bring peace of mind to family members, business partners and employees rather than leaving them guessing about what will happen to the business once you are no longer associated with it.
Planning for succession in a small business can be a difficult situation. It is a sad fact that barely 30 percent of family businesses survive into the second generation and fewer than 15 percent of them last for a third. According to “Bloomberg Businessweek,” passing on a family business can get so contentious that most families choose to sell rather than deal with the disagreements that arise.
To make matters more urgent, the fate of your business impacts not just your family but the nation’s economy as a whole, since the bulk of the economy is made up of small, privately owned businesses. The U.S. relies on the more than 20 million small businesses as they employ half of the American work force. So everyone benefits if you pass on the business or sell, rather than letting it be dissolved or sold at auction.
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