It's long been said that small businesses are the engine that drives our economy. According to the Small Business Administration (SBA), companies with fewer than 500 employees make up 99.9% of the businesses in the US—and they generate 44% of our total economic activity.

Many of these merchants are "Mom and Pop businesses" owned and operated by families. Some go back multiple generations, while others are newcomers hoping to be able to pass a booming business down to their children when the time comes.

While that may be their desire, many small business owners don't take the steps necessary to formalize their intentions. The National Bureau of Economic Research's Family Business Alliance reported in 2019 that only 15% of family-owned businesses have documented succession plans.

The need for a formal succession plan

No one wants to consider what could happen to your business after you're gone. Whether you own a large or small business, you need a business succession plan.

A business succession plan is a how-to guide that provides step-by-step instructions through a change in ownership, whether through a sale or the retirement or passing of the business owner. A well-crafted succession plan will protect your legacy and benefit everyone, including the departing owner, the family (if applicable), the employees, and the new owner.

When you are creating your succession plan, be sure to include the answers to these important questions.

• Who will take over – The first and most important issue to resolve. A succession plan should clearly define who will take ownership of the business and who will control the day-to-day operations.
• How much is the business worth - The valuation of a company should include the method used to determine the value of the business, including business assets and liabilities. Remember that this data needs to be updated frequently.
• What are the details of the sale - If a purchase is involved, clearly outline the sale price and terms, eliminating stress for the departing owner's family.
• What is the timeline –  lay out everything that must be done leading up to the date a new owner would take over the business, along with specific dates as applicable.
• Do you have documentation for the essential procedures – Be sure to include documents that include policies, a list of vendors, and day-to-day responsibilities.
• What happens to current employees – Will longtime employees be rewarded for their service? Will they be promoted? 
• Do you need a contingency plan? – Sometimes, the best plans can go awry. A succession plan should include what would happen if a transition must happen sooner than expected.

As you can see, creating a small business succession plan can be complicated. Many businesses decide to engage a professional to help determine the company's value, the type of succession plan required, and the creation of any supporting documentation.

If you'd like to hire a professional to help you with a business succession plan but are concerned about the cost, Quikstone Capital Solutions can help. 

Since 2005, Quikstone has helped thousands of merchants nationwide pay for their business expenses with a fast and easy Merchant Cash Advance (MCA). An MCA from Quikstone is an intelligent business decision. If you accept credit cards, you could qualify for up to $250,000.

If you want to know how much you could qualify for, contact us today for a no-cost or obligation consultation. At Quikstone, we have one goal, to help you succeed.