What is your succession plan?

According to recent research, a staggering two thirds of US millionaire-owned businesses are operating without a succession plan—and even fewer small business owners around the globe are prepared for their CEO’s eventual exit.

Recent stats from PWC Global show that family owned businesses are no more prepared: 43% don’t have a succession plan in place, and only 12% survive to the third generation.

No matter whether your company has one employee, a hundred or a thousand, a succession plan is essential to minimize the risk of financial loss.

Read on to help prepare for a stress-free transition when it’s time to sell or transfer ownership of your business.

Define your objectives

The starting point for any succession plan is a reflection on your long term goals, both personally and professionally.

Where do you see yourself in five or ten years? What would you like your retirement to look like? Who are the best people to take over if you have to step away from the business suddenly – and how can you best prepare them for the task?

Once you’ve tackled the big picture questions, your next step is to seek planning advice from your lawyer, accountant, wealth management, and business advisors.

At the same time you’ll be able to start grooming your predecessor and training your employees for a smooth transition when you leave.

Tips for successful succession planning

Most entrepreneurs find it daunting to think about everything they’ll need to do before they can leave the company they’ve worked so hard to build. It takes time to create a useful, well-thought out succession plan—so start early, and don’t rush the process.

One of the most important elements of succession planning is clear and timely communication. Be sure to keep key stakeholders, business partners, employees, and family members involved in the planning process early and often.

Set a reasonable timeline for the creation of your succession plan and try your best stick to it. Once you have a plan in place, schedule a review on a yearly basis. It’s always wise to have contingency plans in place in case any sudden life changes require an unexpected exit.

Many business owners time an annual review of their business plan along with a review of their succession plan to ensure both are always up to date.

Final tips

A wealth of information is available online for small business owners ready to start succession planning. Free and low cost tools—including this self-paced e-course—can help you get started and stay on track throughout the process.

Although it’s impossible to predict how long it might take for a small business to sell, a good guideline to keep in mind is two to five years. In addition to the other professionals you’ll want to consult as you draft your succession plan, you may want to consider the services of a business broker.

Ask your business colleagues for a referral to a local broker with experience in your industry. A good broker can really streamline the sales process and maximize the perceived value of your business to buyers.

It can be heart wrenching for a business owner to walk away from their company, and some entrepreneurs will plan to stay involved in some way for a few months—or indefinitely. Many find maintaining an ongoing role in their business can mean a more satisfying, and financially stable, retirement.