Successful succession planning.

• Author: Orr, Vanessa

For many business owners, establishing and building one's own company is a labor of love. So when it comes time to start thinking about passing on the business, either to family, employees or an outside buyer, it's not an easy decision to make. There are many factors that need to be considered before a company changes hands--and these decisions can't wait until an owner is ready to retire.

"Ideally, business owners should begin succession planning as soon as the business is established," said John B. Frazier, vice president of estate and business planning at Parker, Smith & Feek Inc. "Thinking early about exit strategies is sensible--not only in capital planning, but for management and ownership succession as well.

"If not earlier, at the first sign that the business owner is becoming comfortable with the success of the business, they ought to start thinking about succession planning," he added.

"It's simply good corporate practice to have people trained and ready to take over," agreed Nancy Bear Usera, senior vice president for corporate development, Alaska USA Federal Credit Union. "Though the type of planning they do depends largely on the kind of business they own, it is still important to have a plan in place in case someone gets hit by a truck. It really is a corporate responsibility."

Plan. Plan. Plan.

Planning ahead can have many benefits, from providing more financial options for those who want to buy or sell the business, to providing greater freedom to the owner as his or her successor learns to run the company. Business owners also have the advantage of having the time to find the right resources-from attorneys to accountants to specialized succession planners-to help them meet their transition goals.

Even more important, in a family run business, planning ahead gives the owner a chance to determine if the next generation wants to run the business, and gives other family members a chance to weigh in with their concerns.

According to Frazier, the ability of an owner to gradually transition the business to another person not only benefits the business and its employees, but also ensures that its clients are not affected. "Forced liquidations due to the death or disability of the business owner can be particularly disruptive, if not fatal, to the long-term success of the business," he said. "The primary benefit of a gradual transition plan is that it is, due to careful planning and management of expectations, one that hardly...