There are several different types of business succession planning strategies. Even though there may be a different business succession planning checklist for each different strategy, the following is a list of planning checklist items that should be considered:
- Define the timeline for your business succession
The sooner this can be identified, the better. Often implementing business succession planning requires accomplishing tasks over an extended period of time. Time is required to position the new owner/manager with customers, suppliers and employees. Time is required to implement a business succession development plan as described later in this article.
- Define how ownership will be transferred
This requires defining how stock will be transferred. Will the new owner be family members other than spouse or children? When will shares be transferred if the new owners are to be the spouse or children? What if the transfer is to the management team through a leveraged management buyout? What if the company is going to be sold through an Employee Stock Ownership Plan (ESOP)?
- Create a business succession development plan
This is often a step that is overlooked in business succession planning checklists. Each owner has different skills, personalities, and unique talents. Often current owners in a business have complementary, but different skills. Second generation family members have considerably less experience in running a company than the current generation owner. Regardless of who will succeed to run the business, there needs to be a well- constructed process to evaluate the strengths and weaknesses of the new owner or manager and to determine how their skills, personality and unique talents can be used to best manage the company. If critical weaknesses are identified as part of this process, then an employee development plan needs to be developed to address the weaknesses. Or alternatively, someone needs to be identified within the organization or hired that will provide complementary strengths in these areas.
- Have a business succession communications plan
Regardless of how the company will be transferred, a business succession communications plan needs to be developed that clearly describes when each stakeholder in the company is informed. This includes family members, employees, customers, alliance partners, and suppliers. And for marketing reasons, the general public should be notified. Competitors will take advantage of changes in ownership or management, so be clear in communicating how this change will be positive for the business.
- Develop a business succession planning checklist action plan
Once you have decided how to transfer ownership/management of the business, create a detailed business succession planning checklist action plan with tasks, due dates, and assigned roles. Often business succession planning involves many steps and occurs over several years, so creating a written plan, tracking results, and making changes to the plan on a regular basis is critical to staying on the planned timeline for business succession. This business succession planning checklist action plan should include outside help from attorneys, accountants, insurance and exit planning professionals.