What to Do If You Inherit A Small Business
Businesses change hands for several reasons, and not all of them are pleasant. If a sudden death in the family has caused a succession plan to be enacted, you might be facing complex business decisions under a cloud of emotional stress. In these situations, it’s especially crucial that you create a detailed list of steps. By sticking closely to this process, you’ll avoid making rash decisions and remain in line with the company’s long-term goals.
Keep reading to find out the five steps you should take to improve a business ownership transfer.
Step 1: Determine If You Want to Run the Business or Sell It
Running a business isn’t for everyone. When you own a business, it also owns you – or at least most of your time. As a business owner, you don’t get to clock out at 5 pm each day with everyone else. You must get there early, stay late, and manage a variety of different tasks throughout the day. You’re the owner, manager, accountant, and sales rep, sometimes all within one afternoon. If you don’t think you have the entrepreneurial spirit necessary for such a role, there’s no shame in exploring a sale. You might not know the business as well as the established stakeholders and selling it to partners or outside management might be the best financial decision for you. Hiring outside management also comes with its own set of benefits, so you should consider that as well.
Step 2: Consult With Other Owners, Advisors, and Stakeholders
If you’ve decided to take ownership of the company, you’ll need to be accessible to the other business stakeholders. Your new business is the lifeblood of many others as well, and some people might want a different say in the direction of the company. Connecting with other company leaders will keep operations moving smoothly during the transition, while also letting the team know you have a voice and a plan for the future.
Step 3: Review Company Documents and Financial Statements
You can’t avoid lawyers forever and eventually you’ll need to sift through your company’s documents and financial statements. Tallying up assets and liabilities will give you a proper value of the business, a fact you’ll need to keep in mind when determining future plans. Additionally, you’ll need an attorney to consider all the legal and tax implications of the business sale. Business succession plans are often slowed down by unexpected tax obligations, so a good lawyer is a must.
Step 4: Develop a Business Plan (or Tweak the Current One)
The best business strategies often come from collaboration. If the previous business owner left carefully crafted plans for the company, you can use them as a framework for your own ambitions but be afraid to deviate. An ownership transition can produce an environment ripe for new ideas from previously unheard voices. Remember, a business plan never has to be set in stone. You’re just setting goals, both for the present and future.
Step 5: Create a Succession Plan of Your Own
Once you’ve established your own vision for the company, it’s time to consider how you’ll pass the torch when the time comes. Life is full of unexpected circumstances and it’s never too early to think about your own succession and legacy. If something happened to you tomorrow, would your business be able to remain operational? Creating a succession plan requires a coordinated effort from you, your business leaders, and your attorneys, so you’ll want to get started as soon as possible.
Inheriting a business can be an exciting step forward for a new entrepreneur, but it’s important to weigh the benefits and risks before taking ownership. Running your own company means working long hours and dealing with considerable stress. If you’re taking over a company for the first time, follow the steps listed above so that you can foster a smooth transition process and gain the trust of your employees and management team.
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