The Key Steps in Succession Planning – Part 1

Posting by Jacqueline M. Thompson, CPA, Principal

A small business owner once told his accountant that he was not interested in having a succession plan.  “Why not?” asked the accountant.  The small business owner replied “Because I want it to be a sad day for everyone when I die.”  That owner knew the importance of having a succession plan but he wasn’t willing to do anything about it.  Why?  Perhaps he knew how much work was required to insure that his business was successfully passed on to the younger generation.

Here are some of the questions in succession planning that a small business owner must address:

1. Who will succeed me in the business?
2. What happens to family members who are not in the business?
3. What kind of education should my successor receive?
4. What kind of training should my successor receive?
5. Should my successor work for another company first?
6. Should my successor work in every department in the company?
7. What compensation should the successor receive?
8. When should the successor receive ownership?
9. When should the successor receive control?
10. When does the predecessor stop working?

Each of the above is a very important consideration in small business succession planning.  We will address each of them in future postings.  If you can think of an additional factor we should consider in succession planning, send me a note and we will address it as well.

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