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What Happens if My Succession Plan Doesn’t Work?

What Happens if My Succession Plan Doesn’t Work?

Synopsis
2 Minute Read

There is always a risk of your exit plans not working out the way you intended. So how do you successfully design your future your way?

This can be a substantial fear which, depending on the amount of thought you have put into your succession plan, can be completely rational or irrational and even paralyze you completely as you approach the process. There is always a risk of your exit plans not working out the way you intended. So how do you successfully design your future your way? Let's start by reviewing the typical reasons why many succession plans are not successful:

Disregarding the needs and wishes of all the individuals who should be considered in the planning.

Failure to take all the major eventualities into consideration, such as changes in cash flow needs in future years making incorrect assumptions about the wishes of others.

Overlooking the importance of all the moving parts involved in your business and how these parts need to mutually support each other. For instance, it is not possible to do a comprehensive tax reorganization without also considering the human side of such a plan, the impacts on relationships, how the plan should tie into detailed estate planning.

A hesitancy or unwillingness to deal with important matters before they become urgent. At some point, given enough time, all of the required moving parts will become urgent business concerns. However, most of these can be properly dealt way before that happens. Early planning and preparation helps to create more opportunities for future growth and a successful transition.

Choosing to ignore difficult or complicated relationship issues or even worse, leaving it for the next generation to resolve when you are no longer around.

Disregarding valuable input from the professionals and advisors at your disposal, such as your legal, accounting and taxation or life insurance and investment advisors.

Lack of proper documentation as to how the succession plan will fully unfold. It cannot be emphasized enough that a formal, documented plan will greatly enhance the success rate.

Selecting the wrong successor or failing to adequately prepare the incoming leader, by not having clear selection criteria. In short, here are many ways that the risk can be mitigated and in most cases, be completely eradicated. Business—like life—is risky enough without taking unnecessary chances. You need to be prepared and that means developing a proper succession plan now, so it’ll be there when you need it most. Plan carefully, plan fully, and plan long-term now.

For more information as to how you can successfully transition out of your business, contact Eben Louw, CPA, CA at 604.853.9471 [email protected].

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