The previous article discussed succession planning formula for a more successful business today. This week I’ll briefly cover how succession planning helps improve retirement and more importantly, when that succession planning should begin.
As an estate planner with a number of financial planning colleagues, I can attest to the fact that we may have several methods and vehicles to protect and grow your assets and with a proper succession plan, those options may increase dramatically. However, without a proper succession plan, the options could dramatically decrease.
Added benefits to retirement include:
- Being able to withstand harsh bear markets;
- Having a more secure retirement because your plans are more realistic;
- Retiring more efficiently and with fewer adverse tax implications; and
- A Less stressful retirement, even if you experience 1 or 2 bumps in the road.
Most importantly, a properly executed succession plan eliminates the need for a “garage sale.” So as I said previously, in addition to making more money, establishing and implementing a succession plan results in an even more successful business today and a relatively stable and peaceful retirement.
Now, some of us have a good idea on when we would like to retire but there is an ideal time to start succession planning and that time is before opening your doors for business. If you incorporate succession planning when drafting your business plan, then you will ultimately use and allocate resources more efficiently and plan realistically. Moreover, you’ll establish processes that are key to a successful business sale or shareholder transfer. You may also realize that the most important factor in executing a successful succession plan is having a well-developed successor.
Sometimes, we don’t start actually planning at the beginning. Many of us just do and do and do without stopping and taking the time to think about where all this “doing” is leading. But even if you’re 10 years into your business with about 10-15 years to go, it’s not too late. You probably have some advantages, e.g., a steady clientele or a steady and established referral base; a solid understanding of the rules, regulations, and best practices applicable to your business; “brand equity” among your peers and in your community; staff, if you have them, who are loyal; and if you’re anal, like me, you have helpful processes and spreadsheets in place to get you through the day, week, month, year, and decade. Conversely, 10 years in you may have some disadvantages: too many processes, some of which are inefficient or redundant; and you could be stuck in a time warp working against yourself, treating yourself like an employee and your business like a job, instead of CEO and enterprise.
New business owners even with great business plans are also disadvantaged because the business is…new. So mistakes are going to be made and newbiz owners won’t be able to plan for all of them.
It is when the business shingle is rusty that folks should proceed quickly but with caution. At age 60-65, triage may be needed, but there’s still hope. At 66 – 70, like Will Smith said in the movie, Independence Day, “I hope ya gotta an airbag!” And at 70 ½, I think land in Jamaica is reasonable.
Knowing why and when to start succession planning, we can move on and discuss the personal and professional practical considerations..Next week!