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Ideas and insights that need to be carefully addressed to prepare a business succession plan for a small/home based business.

Succession planning is often taken for granted by some small or family-run businesses. It is important to consider it early on, whether the entrepreneur only plans to retire or not. Most critical, is the issue of the inevitable event of death or accident of the business owner.

The Importance and Features of an Effective Business Succession Plan

The lack of proper transition planning is an important factor why some small businesses fail after the family business head or founder dies. It is disastrous for a flourishing and profitable business to lose it from lack or absence of succession planning. It is also devastating to think of the business owner’s efforts and sacrifices to build the business only to be insolvent.

Most business owners face the challenge of either transferring ownership to a family member or selling their business. It is important to implement a good plan. Here are some features of an effective business succession plan. It helps the business owner:

• Carry out the succession of the business and ownership in an orderly manner
• Reduce future complications among the heirs, as control is transferred according to the wishes of the business owner
• Provide overall economic well-being for everyone after the business owner is gone, retired or demised
• Minimize the tax liability for business owner and the heirs

Succession Planning Issues for Small or Home Based Business

Everyone will have to retire sooner or later. Retirement is not just a matter of deciding to retire or not. With succession planning in a small or family-run businesses, important questions are formally answered, such as: “Who will manage it after I’m gone?” “Will I want my business to continue or will I sell it?” “Who’s going to manage it after I go?” Such questions and other related issues are better addressed as prepared beforehand.

Financial Issues

A succession plan should be part of the overall financial plan that covers objectives and other needs. It is more effective to break it down into three key sub-issues:

• ownership
• management
• taxes

Management and ownership are not necessarily one and the same. For instance, the business owner may want to transfer business management to one of the children but transfer equal shares of business ownership to all children, and this is whether they are actively involved in the business operations or not.

Tax minimization strategies also play a key role in the planning process. The taxes component of succession planning looks at how to minimize taxes upon death. There are asset transfer tax strategies or tax accountants and lawyers who can be consulted to provide valuable advice.

Family Relationships Issues

With family businesses, succession planning can be complicated because of the personal relationships involved. Therefore, early on topics such as aging, death, and financial affairs should also be dealt with.

In small and home based business, family is often the primary emphasis of succession planning. Whether the direction is future business management or business ownership, the business owner’s succession planning should be a part of his or her overall business management and system processes. Apart from ensuring that enough business money is available to retire on, the life of the business is at stake when he’s no longer running it.

Readers may want to check out the related articles How to Delegate Tasks and Manage Efficiently, Managing Time and Setting Priorities, and Business Plan Outlines and Guidelines.

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