Do You Have a Succession Plan for Your Business?
~by Brooke Chaplan~.
Business stock distribution is normally determined early on in a business and is included in either the bylaws, operating agreement, term sheets, or some other formal agreement. Usually, stock distribution is reserved for founding partners, board members, and investors. However, business owners should also consider making stocks available to other deserving individuals within the company to include board appointed successors as well.
Below are some areas to consider when developing a succession plan for your business.
What is a Successor?
A successor is a person who follows or succeeds another person within a particular job position. This person is normally identified early on and is prepared for filling in the shoes of his/her predecessor. As an incentive, various perks are offered, including issuing company shares.
What is a Succession Plan?
A succession plan consists of the implementation of steps for a successor to make a smooth transition into their new role. This may take some time before fully implemented.
However, some steps to take to implement a succession plan is as follows:
1. Identify and appoint your targeted successor – Based on an employee’s work ethic, level of commitment, and performance ability, identify the best candidate to transition into the new management/ownership role where the former owner will be stepping down.
2. Put some type of formal training into action – Begin to take the necessary steps to start preparing your successor. If you plan to retire and have a set date in mind, you should use that time frame to determine how much time you’ll have to fully train the successor in every aspect of your job assignment until you’re 100% comfortable with their performance.
3. Begin making a shift of control – Before you actually depart from the company, give your successor the opportunity to operate in their new role while you are there to oversee their performance. That way, you still have some input as to how things should be run prior to your departure.
4. Sign agreements – The new successor should sign any agreements that address their role in the new position along with any additional benefits, issuance of stocks, and other relevant areas.
5. Install your new successor – Make the installation of your new, fully trained successor while you are still on staff so that you will have the opportunity to watch, guide, and oversee any remaining areas that arise prior to your departure.
Succession in your company is important for its future. Make sure you have a plan and people in place to ensure things go smoothly down the road. Consult with an Alternative Law firm to be sure your succession plan is legal and binding, and that you can get the people you want in place the first time around.
Meet the Author: Brooke Chaplan
Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most her time hiking, biking, and gardening. Contact Brooke via Twitter @BrookeChaplan.