You may feel like no one could possibly run your business as well as you can — but like it or not, you’ll have to sacrifice control at some point. Whether an unexpected illness or injury puts you out of action, or you just find it harder to keep up the 12-hour workdays in your old age, at a certain point, it’s time to start thinking about your transition plan. Here’s what to consider when it comes to planning the future of your company without yourself at the helm.
Discuss your plans with close family members and business partners. Have you always dreamed that your son would take over the family business when you died? If he’s not aware of your plans, he may be shocked and unprepared to find himself an accidental CEO after you’re gone. In order to make sure that everyone involved in the business will know what to do when you’re no longer able to run your company, talk with family members and business partners about your plans and expectations for the company, and find out what their priorities are. If it turns out your son would rather be an actor than a shop owner, come up with a Plan B before it’s too late.
Work with an estate attorney to draw up a plan for your business. Estate planning is always complex, but it’s much more challenging when there’s a business to consider. If you don’t plan your estate properly, your heirs could be subject to a 35-50 percent “death tax” on your business, which means they’ll likely be forced to sell it at a loss, so work out a strategy with your lawyer to alleviate this burden. If you’re joint owner of a business, you’ll also need to create a “buy-sell agreement” that establishes a sale price for your share of the business if your partner chooses to buy out the share upon your death. Be sure that your estate plan clearly communicates your goals for your business, and discuss the plan with relatives and employees who will be expected to manage the transition.
Groom a successor to take the lead. Whether it’s a relative or employee, you likely have someone in mind to take control of the business after you’re no longer able to run day-to-day operations. Don’t simply treat that person as a member of your staff: Give him ample opportunity for training and education, and gradually pass over management responsibilities. Even though you still want to maintain control as long as you can, it’s important to let your successor get used to making decisions that affect the company’s future. You never know if you might need to step aside earlier than planned, so the company’s future could depend on making sure that your second-in-command is prepared to step into the lead at a moment’s notice.