Creating a succession plan is an essential step in ensuring that a company continues creating wealth across generations, and yet we see so many business owners put it off until the last minute.
Here are a few points to consider when planning for this transfer of ownership to help prevent a business dispute from arising in the future.
Determine the Traits of a Qualified Successor
The first step in creating any plan is to ask yourself why it’s important. In this case, you want to appoint the best possible candidate to maintain and lead the company you’ve worked so hard to uphold over the years. But what does “best” entail?
This could include a minimum number of years of experience in the industry and credentials you find on a resume, as well as the core values you deem essential for running your business well. Is this person honest, accountable, direct, wise, decisive, approachable… Which characteristics are non-negotiable? Determining these traits ahead of time will help you narrow down potential candidates when it’s time to make a decision.
Build Up Leaders in Advance
When successors are not prepared to assume leadership of a business, disputes often result. This is especially true for family businesses!
Once a successor is selected, it is crucial to ensure that the successor has the knowledge and experience to take the reins when the patriarch or matriarch passes away. It is up to the current owner to school and prepare the future successor ahead of time to make sure they are ready to lead the company well should the current owner pass away or need to resign unexpectedly. This process should ideally begin years before the owner expects to step down.
Of course, building up future leaders who are emerging in your company and helping groom them for a larger role is an investment that will also give the owner more freedom to take a sabbatical, go on vacation, or simply reduce their responsibilities at the office in favor of more time at home.
Prepare to Pass the Baton
Many people avoid thinking about what happens after they are gone because it seems fatalistic. However, we can guarantee that NOT thinking ahead about the possibilities or setting a security plan in place will likely create chaos, resentment, confusion, and costs for anyone who is left to pick up the pieces when you’re gone.
Smart leaders know that thinking about stepping aside is a necessary step to ensuring the continuation of the business. This plan isn’t about the “doom and gloom” of preparing for the worst, it’s about establishing a secure path for your business to thrive for generations to come.
The right way to successfully transfer business wealth to your heirs can be different for every family. If you have questions about how to manage your company’s equity after you step down or pass away, contact our office to speak to an attorney. Our firm has more than three decades of experience in resolving business disputes, and we understand how to prevent and resolve conflicts among heirs.
Gaslowitz Frankel LLC is the Southeast’s premier fiduciary litigation law firm. Our legal team specializes in all aspects of fiduciary disputes representing individuals, executors, trustees, investors, shareholders, and corporate fiduciaries in complex fiduciary disputes involving wills, estates, trusts, guardianships, and businesses.
