By Meredith Wood

Are you ready to consider retirement? If so, congratulations! Along with all the excitement that closing this chapter in your life can bring, it can also be stressful to figure out how to leave your business in good hands when you are gone. Now is the time to set up a plan to make sure your business can continue successfully without you.

Consider the steps below to create a successful plan of succession.

Establish Your Goals and Objectives

What are your objectives in establishing a successor for your business? Consider the goals and vision you have for your business going forward. Identify what your goals will be with a new generation of management. Having a clear vision will help you pick the right person to replace you.

Pick a Successor

Some business owners choose to appoint a family member, partner, or assistant to take their place. Some choose to hire externally. Some choose to sell their portion of the business entirely. The bottom line is you want to find the best person for the job and the best fit for your company.

In choosing your successor you will want to:

1. Define the future requirements of your position.

You should identify the mission and goals of your company now and 3-5 years in the future. You should think strategically as to how the company may grow and its future potential. The role of your replacement may change: you and your partners may decide it is time to split up your responsibilities or expand or downsize the position. Instead of hiring, if you are a partner in a business you may choose instead to sell your portion of the business to other partners in a buy-sell agreement.

2. Assess your team.

You know the knowledge base, skillset, and abilities that will make a person in your position successful. Consider the people on your team. Look at their strengths and weaknesses, and determine if anyone seems like they will fit well into your vision for the future of your position. Keep those people on your “short list” of candidates when the time arises. If don’t plan to retire for a few years, now is the time to help your team develop leadership skills that will be useful when they are called upon to replace you.

3. Look outside your team.

External candidates can bring fresh ideas, new skills, and energy to your business. If no one internal seems to fit the bill, you will want to look outside of your organization.

Coach and Develop Your Replacement 

It is best if you can train your replacement on what your position requires. This will ensure a smooth transition and that your replacement understands the culture and mission of the company, your goals for where the business will go, and give you time to introduce your replacement to your team. So if you are preparing someone to step into your role, you should prepare them to do your jobs through training, coaching, and feedback. This can often happen years before you decide to retire. You can “preen” your replacement for an extensive time before you give your notice.

Determine the Worth of Your Business/Your Share of the Business

When considering retirement, you must find the set dollar value for your business or your share of the business. The way to appraise your business is to either used a Certified Public Accountant (CPA) or by an agreement between all partners involved in the business. This assessment will be used to sell your business or portion of your business to your partners, or to leave your replacement with a thorough knowledge of the company’s worth.

Create a Buy-Sell Agreement

If you are transferring your business to associates, create a buy-sell agreement that is fair and reflective of your value of the business. You should also create a plan that minimizes taxes for all.

Create a Transition Plan

Establish a timeline for the implementation of your succession plan. If you are selling your portion of the business outright to partners, when will this transfer go through? If you are bringing in an internal or external replacement, when will you begin training them?

Furthermore, the client is the reason for your business. Thus, when creating a succession plan, it is also time to think about your client transition plan. Consider how you will alert your clients to the change, how they will be notified, and how will you work with your replacement to ensure you do not lose your clients. Remember that your replacement will need to establish a new relationship with your clients. Depending on the nature of your work, the personal relationships you have built up over the years with your clients are significant, however with the right plan, they will accept someone new.

Many business owners don’t have a formal plan in place. However, if you are considering retirement, it is a good idea to create a plan for yourself and your business to ensure a smooth transition that benefits the future of your business.