In 2020 alone, about 66 percent of business owners retired early or accelerated their exit from the company. This serves as an important reminder: it is never too early to write a business succession plan.
If a business owner does not have an established plan for succession, they could find their business slipping out of their hands and leaving their family much sooner than anticipated.
Changes in succession plan trends
Financial Advisor Magazine discusses the outlook of succession plans in recent years. According to one survey, up to 34 percent of business owners sped up their respective succession plans. Another 35 percent retired sooner than anticipated.
Meanwhile, a whopping 88 percent of business owners had the intention of passing on their business to either a spouse or descendants. However, without a succession plan and a good business continuation strategy, a business owner is essentially setting up the heir for failure.
What makes an effective plan?
In an effective succession plan, the heir(s) to the business get trained – often personally by the current business owner – before said owner ends up in a situation where they can no longer pass on their knowledge.
Business transfers happen for many reasons, and a vast number of them are unexpected ones. If a business owner cannot recreate or pivot a business on short notice, it could end up with a competitor buying the company out for cheap. This can impact employees and customers alike.
Thus, it is crucial to not only have a flexible plan prepared far in advance but for any potential heir to already have a good idea of what is going on.
