A business exit strategy, or a succession plan, requires a strong organized plan for the unexpected. That includes preparing for contingencies like financial hardship, disability, injury, and death. Plus, it means having a plan for the succession or transfer of ownership of your business when you are ready to retire (voluntary exit) or when you become disabled, divorced, or deceased (involuntary exit). In fact, a successful exit plan may in fact have very different terms, prices and conditions based on whether the exit is voluntary or involuntary or may be two separate plans all together.
A comprehensive evaluation of your business’s succession is critical to a company’s long-term health and stability. Without one, the company will simply die with the controlling group or within a short period of time after the exit of key men and women operating it. In order to have a solid strategy, leverage the expertise of an experienced succession planning attorney. This will help you to identify, assess, and create a succession plan for your company.
Challenges to Succession Planning
There are plenty of challenges that must be addressed in proper succession planning. Some of the most important to work through with your attorney include the following:
- The size of your organization determines your ability to provide opportunities for advancement, along with employees with the potential and the drive to advance their careers to move the organizations forward;
- Issues with your financial resources, so that your employees remain content with adequate salaries and benefits;
- The nature of funding may be an issue as more organizations rely on project funding as opposed to core funding;
- Looking at temporary staff and consultants as part of the talent pool available to your company;
- Senior managers who stay in their positions for too long or have expectation rights that are unrealistic;
- Management that no longer has the skills needed for the top job;
- The requirements of your company’s executive leadership have changed;
- Your company’s leader is no longer making a meaningful and productive contributions to the company;
- Failing to strategically include promising employees in the succession plan, rather than including those who are disinterested, unmotivated, or lack the capacity to advance;
- Inadequate training and development will mean employees who are not ready for a promotion;
- Your succession plan doesn’t promote people regularly, resulting in potential successors leaving the organization for other opportunities; and
- Poor communication, which creates confusion and unrest within the company with staff speculation about the true details of the succession plan.
These and other challenges must be addressed so that your company has a successful transition of leadership. Failing to do so may mean the failure of your business.
Contact an Experienced Succession Planning Attorney
Your company must create a formal succession plan to increase your chances of success and a more lucrative sale of your business.
Succession planning for your medical practice should start today. Contact N·M Law, APC (949-253-0000) to speak to an experienced succession planning attorney about your practice and your plans for the future.
Disclaimer: This article is intended to provide a general summary of laws in the State of and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.