Though people may realize the necessity of Minnesota wills, health care directives and other more common estate-planning tools, it may not be as obvious to create a succession plan. In some cases, business owners assume wrongly that their children are prepared for the hand-off or understand what is expected of them. Without a clear plan that has been worked out with those around you, the continuity of the business you worked so hard to build is far from assured.
Experts interviewed in a recent New York Times article said that business owners who fail to create a workable succession plan are asking for trouble. Not only can the lack of a plan lead to the destruction of your business, but it can also lead to the division of your family. In far too many cases where there is no clear plan in place, family members begin squabbling over the future of the company, who will take over and how it ought to be managed. This in fighting can cause not only strained relationships, but ultimately poison the health of the company.
So what can you do to prepare a succession plan? Keep reading to find out.
Minnesota Estate Planning: Choose a successor
This is the first and often the most difficult step in creating a good Minnesota small business succession plan. Many business owners put off the entire process due to the anxiety that exists around choosing a person to take your place. This can be a fraught emotional issue and has the potential to lead to bruised egos. However, no planning can take place without this so it needs to be tackled head-on.
One tip that experts have to make the process of choosing a successor easier is to consider making the decision more scientific. Companies exist that can put family members through rigorous analysis, making them submit to interviews and personality testing. This kind of merit-based approach ensures that issues like birth order or gender don’t cloud the decision-making process and can help guarantee that the best person for the job is chosen.
Make sure they’re ready
Once you’ve settled on the person you want to take over you need to ensure they are actually ready for the job when the time comes. Business owners should make sure to bring the successor in on important decisions, allowing them to get a feel for the kind of issues they will have to deal with in the future. Sending children to work at various components of the business is another way to guarantee they have a complete feel for how the company operates.
Keep valuable employees happy
In cases where you’ve settled on a successor and the person is a family member, it’s possible that other non-family employees may feel overlooked as a result. Just because they weren’t chosen as a successor does not mean they are not valuable, and keeping them around can be critical to the future success of your company.
One way to navigate this tricky issue is to bring crucial non-family employees into the company, either with increased decision-making powers or giving them a share of the company, anything to make them feel personally invested in the ultimate success of the operation.
Consider a sale
The fact is that not every small business owner has a relative ready or willing to take over operations. Some people may simply not be a good fit for the job and others are either too young or too inexperienced to handle the job. As a result, a sale might be in everyone’s best interest.
Besides a total sale of the company, business owners can consider having a partner or long-term employee buy them out, often spreading the payments out over a number of years. Another option is to create an employee stock ownership plan that allows workers to purchase shares of the business from the owner, creating liquidity for the owners while keeping the company in employees’ hands.
Though it may be confusing, creating an effective estate plan does not have to be an overly complicated process. An experienced Minnesota estate planning lawyer can help walk you through the process of establishing or updating a will or trust. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
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Contact the Flanders Law Firm today. The firm offers free consultations to all potential clients. Call (612) 424-0398.