Why Your Business Needs a Succession Plan

Why Your Business Needs a Succession Plan
A lawyer making a succession plan for his client

All business owners know the importance of creating and executing a successful plan. Their main focus is to keep the company running smoothly and to make it the financial success they hope for. Too few owners, however, think about what might happen in the event something unfortunate disrupts the operation of the business. Wise planning requires consideration of the unexpected, and this is where a succession plan will help.

Life changes and other circumstances that impact a business will eventually happen. Inevitably, every owner will retire, leave the company, or pass away. A sudden accident could leave you disabled, or unable to properly carry out your role in the company. Managers and other key leaders within the organization could leave. These and other situations could lead to disarray within the business, thereby jeopardizing its future. Fortunately, a plan drafted by a Connecticut business lawyer can help steer your company to where it needs to be.

A comprehensive succession plan will accomplish numerous objectives, including:

Preventing disputes within the company. Without you, the owner, at the helm of the company, a power struggle among employees or managers could arise. The succession plan clarifies who assumes authority in your absence and prepares for replacements in the event other leaders exit.

Retaining key employees. To discourage leaders from leaving your company, a properly drafted plan will ensure that appealing benefits are offered. It will also use non-compete agreements to protect the business if they leave anyway.

Reassuring stakeholders. Those invested in your company are likely to remain if they understand how you handle emergencies and other exigencies. When stakeholders are comfortable, your business is more likely to maintain a sound financial footing.

Minimizing the effects of sudden changes. No one can prevent catastrophes or other unexpected events. However, a Connecticut business attorney can help owners manage these circumstances by way of a succession plan.

Reducing stress. Knowing there is a comprehensive plan in the event something happens to you makes it easier to run your business. This reduces stress and helps you focus on your company’s success.

Maintaining stability and confidence in your organization is essential to a good succession plan. Working with a Connecticut business lawyer, you can execute a succession plan with terms that address such matters as:

  • What happens to ownership of or shares in the business after a major change. A family-owned company, for instance, can remain in the family with the correct terms and provisions.
  • Whether interested parties such as employees will be offered shares belonging to the exiting or deceased owner. This is often done on a right of first refusal basis.
  • How to ensure the business maintains a proper cash flow. It is important that the company continues to pay its bills, as well as expenses arising after the unexpected change.
  • Protecting institutional memory when management changes hands. New people will bring their own ideas to the company, but upholding significant traditions is essential to the company’s identity.

Don’t Leave Your Business Vulnerable to Life’s Changes

In many ways, succession planning is like estate planning. Not everyone wants to talk about it, and too few think about it. But just as you need a will or trust for personal assets, you need a succession plan for your business. You’ve worked too hard to let your company fall prey to disorder after you are no longer running it. The attorneys at Aeton Law Partners will work with you to understand your goals and implement strategies that honor them. Don’t wait for hypothetical circumstances to become difficult realities. Reach out to us today to get started.

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