Without a succession plan, Pennsylvania business owners experiencing an emergency may end up selling their enterprise much sooner than expected. An online Ipsos survey of business owners discovered about 66% of them accelerated an exit or retired early during 2020.
As reported by Financial Advisor Magazine, out of the survey’s respondents, 35% sped up their succession plans. Thirty-four percent retired before they expected to. Some owners did not have any established plans for leaving their businesses to a successor.
Heirs might inherit a business they cannot manage
The Ipsos survey revealed that 88% of business owners planned to pass on their enterprises to their spouses or descendants. Without guiding them through a business continuation strategy, however, an owner’s heirs may take over when least prepared for it.
A sudden illness or death could result in a spouse inheriting a business he or she has no experience in managing. Children or grandchildren inheriting an enterprise may not understand its operations. Effective succession planning involving heirs typically includes training them to run a business before the owner retires or becomes ill.
A business transfer could occur suddenly or unexpectedly
An abrupt disruption in business continuity may result in an owner or heir selling it. As reported by Entrepreneur Magazine, an inability to pivot or recreate a business may lead to a competitor buying it for a low price.
The unanticipated sale or liquidation of a business may affect its employees and customers. If an owner’s employees appear interested in taking over, however, a succession plan could include offering them stock options or financing a purchase.
An unforeseen event or disaster could severely disrupt a business’s continuity when an owner has not prepared for it. Estate planning documents may, however, include detailed instructions for a spouse or an adult child to follow when inheriting a business.