Likely, if you are asking yourself this question, then you have already started the process, even if it just a mental rundown of options. And, of course, most people involved with succession planning would tell you that the best time to start is “yesterday.” The reason is that the process can take a substantial amount of time. For instance, think about discussing a “buy-sell agreement” with your partners. While the drafting might not take long, reaching an agreement with your co-owner may involve a substantial period of time. This is particularly true when there are differences in ages, family obligations, ownership amounts, etc. When co-owners are at different stages in their life, they will have different needs. The best buy-sell plan is thoughtful and has the support and commitment of all co-owners because it serves their needs. Likewise, the best buy-sell plan is made when the need is not imminent (e.g., an owner with a terminal illness, facing a divorce, in financial distress, etc.).
Another reason to start early is when the succession plan might involve an exit rather than a continuation of the ownership. When an exit or sale is contemplated, taking several years to build out management, to improve processes, to commit key employees and to increase sales and profitability can make a significant difference in sales prices. These efforts may take several years but they can have a huge payback.
You can call Henry G. Grendell at 440-462-6503 for a free initial consultation to discuss your business succession plans.