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What is succession planning?

On Behalf of | Jun 26, 2024 | Estate Planning

Business owners often have a lot on their plates. They need to know the tiniest details about company operations while simultaneously focusing on long-term goals. They need to have a plan for the future while actively pivoting to respond to changing economic circumstances.

One of the many concerns that a business owner may need to address is the possibility that something may happen to them. They could have a medical emergency that leaves them unable to operate the company for weeks. They could die prematurely, leaving the company without leadership. The creation of a succession plan before anything happens to the business could potentially help protect the organization from instability or collapse if the current owner can no longer serve in a position of leadership.

What does a succession plan include?

A succession plan is a document detailing how to have someone else step into an executives role. Many succession plans include detailed information about the qualifications necessary not to perform the job. Succession plans may even include the names of specific candidates who could step into an executive’s role. A succession plan may also include information about training that could help prepare someone to take over company operations.

Additionally, succession plans sometimes include details about what the job requires that aren’t available elsewhere. Information about business accounts and other key details that could ease the transition to new leadership could be valuable inclusions in a succession plan. Ideally, the contents of a succession plan allow for the relatively quick and painless assumption of authority by someone with the right skill set.

When should people create succession plans?

The best time to create a succession plan is now. Much like estate planning, succession planning is about protecting against unforeseeable circumstances. People may wait until they believe a transition is likely, that may be too late. Some larger organizations include requirements to create a succession plan within a certain amount of time after assuming a position at the company. Those who don’t answer to a board of directors or higher-ranking executives have to decide for themselves when to create a succession plan.

Many business owners draft succession plans as part of a larger estate planning effort. The sooner a business owner creates appropriate documents, the less they’ll have to worry about the future of the company that they operate.

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