Founding Attorney
Succession planning is crucial for business owners who wish to transfer their company to someone else. Whether you plan to keep the business in the family, promote from within, or sell to a third party, a comprehensive business succession plan will make the transition smoother and more profitable.
Improve Profitability and Financial Health
One of the best ways to make sure the transition between business owners is smooth is to strengthen the business’s financial position in the years and months leading up to succession. If you plan to sell the business, prospective buyers will closely examine your business’s financial records before committing to the purchase. And if you’re leaving the business to family or a trusted employee, you want to put them in the best possible position for success.
Some of the best ways to do this are by:
- Diversifying your business’s customer base and revenue streams
- Cutting unnecessary costs by regularly reviewing expenses
- Maintaining up-to-date financial records that accurately represent the business’s financial health
Streamline Operations and Increase Efficiency
Businesses that operate smoothly are easier for new leaders to integrate into. If the first thing a new owner has to do is fix all the inefficiencies in the business, it makes the business a less attractive prospect and can hurt its long-term success.
To prepare for business succession, owners should standardize all processes and documents, from client onboarding to inventory management. You can do this by leveraging technology solutions, such as using accounting and customer relationship management (CRM) software and automating processes where possible.
It’s also important to develop a strong management team of existing employees that the new business owner can rely on.
Strengthen Customer and Supplier Relationships
Businesses that don’t have strong customer and supplier relationships often struggle, especially during leadership transitions. Before passing on ownership of your business, forming long-term contracts with customers and suppliers can be beneficial to reduce disruptions during your succession. These contracts can guarantee business stability for months or years, giving the new owner time to get their bearings.
Ideally, your customers and suppliers will be loyal to the business you’ve built rather than to you as its leader. To prevent them from being blindsided by your departure, you may want to reach out to longtime customers and suppliers to assure them that business will continue as usual in your absence.
Enhance Market Position and Brand Reputation
A business with a strong brand and competitive market position is more desirable for potential buyers or successors. Before you depart, you should consider what differentiates your business from competitors and focus on highlighting these qualities internally to your team and externally to your customers.
Some ways to improve your brand’s market position include:
- Increasing brand recognition among customers by investing in digital marketing, such as paid ads, search engine optimization, and content marketing
- Increasing brand reputation by seeking industry awards, certifications, and positive customer reviews and testimonials to display
Reduce Owner Dependency
A business that heavily relies on its owner can be a red flag for potential successors. To make sure the business can continue operating without you at its helm, you should:
- Train your successor on their new leadership role if keeping the business in the family or promoting from within.
- Gradually transfer responsibilities to key employees to reduce the pressure on the new owner.
- Develop standard operating procedures (SOPs) that employees and the new owner or management team can follow to reduce disruptions.
Contact Our Business Succession Lawyers
If you need assistance making a business succession plan, contact Merlino & Gonzalez to speak with an experienced succession lawyer serving New York and New Jersey. Our team can help you draft legal documents and prepare to step down from your role, all on your schedule.