Thinking about your legacy is a necessary part of preparing for retirement. As you reach the later years of your life and your business, you’ll need to ensure your credibility as a business owner after turning over control of your company. Investors and stakeholders who have been with you since the beginning need assurance that you’re capable of maintaining a continuous operation even after you let go of it.
Preparing to Let Go of Your Business
Building your company from the ground up and maintaining it for years is an impressive feat, making you one of the few people who can say that you’re your own boss. However, this achievement can blind you to the fact that your retirement years are creeping just behind the corner. Succession planning is a necessary requirement to ensure your company’s future and prepare you for the next phase of your life.
In this article, we’ll share three critical facts about succession planning.
1) Succession Planning Isn’t Just About Your Retirement
Remember that succussion planning goes beyond your needs and benefits. It includes your retirement plans but also focuses on how your company will function without you. It’s a given that an owner’s retirement is an eventual component of a succession plan. However, it also includes other clauses, including but not limited to the identification of key successors, role development of each position, and financing the transition from current to future business managers. Instead of just being a list of delegations and asset divisions, it should also specify infrastructure changes to accommodate the shift in leadership.
2) Succession Planning Is Better Than Selling Your Company
Most companies generally have two options once they reach a certain level of success and notoriety in the industry. They can either keep up against larger conglomerates or decide to sell by merging with larger establishments. Selling to another company can seem like a straightforward exit strategy with immediate returns. In reality, the tradeoff is much more complex and potentially less profitable in the long-term.
For example, niche businesses generally won’t have the best figures for survival after an original owner leaves it. This practice may be more preferred for firms such as financial advisers, CPAs, and other related SaaS establishments. However, it’s important to read your standing’s value to your client base. Selling your business can result in less profitable sales revenue, especially if you let go of full ownership of the company. In contrast, it’s much better to observe a transition period for your company, even if it will take 3 to 5 years of preparation for the eventual succession.
3) Succession Planning Is About the Company’s Survival
It’s important to remember that succession planning doesn’t imply that you’re about to leave your company. Similarly, people who have last wills and testaments don’t necessarily wish to pass away immediately. In fact, business owners that draft succession plans don’t always choose to let go of their company’s operations completely. It’s a gradual shift that allows them to take a lesser position to ensure the new leaders’ capabilities in handling routine procedures. It’s a way for you to maintain quality control before taking your exit completely.
There’s no telling what the future will hold, no matter how accurate your sales projections are. Due to the arrival of COVID-19, many business owners became aware of how necessary it is to anticipate the future with preparation. A succession plan is your insurance policy, ensuring that your company can remain stable and sufficient, even after letting go of the driver’s seat.
Securing your financial future is our top-priority at Alberta Wealth Management Inc. We offer asset management in Edmonton, AB, to ensure that you’re making the right business decisions. Call our financial experts today to receive professional handling of your assets!