In our previous blog, we’ve discussed the various ways to manage an effective business exit strategy and how business management and strategy go hand-in-hand. When it comes to establishing a business succession plan, the importance of strategizing is no different.
Keep reading to learn what a business succession strategy looks like for your business and the many different ways you can transfer ownership.
First, we’ll look at what business succession means in the context of business strategy. According to Investopedia:
“Business succession planning refers to a business strategy companies use to pass leadership roles down to another employee or group of employees. It can also provide a liquidity event, which enables the transfer of ownership in a going concern to rising employees.”
This type of business succession strategy is used to ensure the company continues to run smoothly (and without interruption) after important directors, employees, or a group of employees retire or leave the company.
Ultimately, it’s important to remember that business succession planning is not a one-size-fits-all policy. Each business will have its own outlined strategy and should be updated and reevaluated each year to stay up-to-date on business and employee information.
Next, when you and your company are strategizing your business succession plan — and are ready to make the transition into ownership — you have a few options to consider.
Not only is there more than one way to transfer ownership, but there are a variety of methods that are helpful to consider when making this important financial decision.
Here are just a few of the top ways to transfer ownership and strategize for business succession:
Particularly for businesses who have children or other family members working for them, choosing an heir as a successor is a common element in one’s business strategy.
Depending on the situation and the amount family members at hand, it’s suggested to establish clear directions on who will inherit the estate and how other heirs will be reimbursed by the business.
Some businesses may consider transferring ownership to those who are titled or agreed upon as co-owner of the company.
Oftentimes, owners and directors are looking to retire or move on to a new opportunity. This can lead to a mutual agreement of transitioning titles and duties to partners already involved within the company.
Depending on the business, sometimes the ownership transfer strategy you’re looking for is right in front of you!
Selling and transferring business ownership to an employee of your company can be the ideal situation for those who do not have an heir or co-owner to consider. This keeps management of the business in a closed-loop, seamless transition.
Oftentimes, companies will look outside of their circle in search of guidance from their community. This type of third-party business succession includes introducing entrepreneurs (or even competitors) to the company available for transfer.
This isn’t always the easier option - factors like business valuation and the buying and investing market in general are to be considered.
Finally, at SevenBridge Financial, our team of advisors are dedicated to ensuring your business succession is always prepared and planned for.
Through our Business Owner Services, we offer an outside advisor perspective that ensures a seamless business succession strategy and transition for you or your employees.
Please do not hesitate to contact us with any questions about our services, our process, or how to get started with a project.
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