A business succession plan ensures that a business continues to thrive subsequent to the completion of the present controllers “hands on” involvement. It is a vital measure that will safeguard the invested capital against risk.
A succession plan should address issues such as:
- Changes caused by the diminishing day to day involvement of those controllers;
- The corresponding increased role of their successors, being family members or otherwise;
- Whether ownership of the enterprise is to continue following the cessation of “hands on” involvement of key stakeholders caused by their retirement or death;
- The policy for distributing income to family members who do not have a “hands on” involvement in the business; and
- The appropriate method of allocating and or retaining the capital received as a consequence of its disposal.