Women entrepreneurs face a unique set of hurdles when it comes to starting new businesses, particularly in a post-pandemic world. In 2021, women started about 40 percent of all new businesses, and this figure has remained fairly steady for decades.1
With the unique stresses of operating a brand-new business, many women business owners may not give a lot of thought to succession planning. However, life is full of unexpected twists and turns, and succession planning can be a critical step in ensuring the long-term health and viability of your business. Below, we discuss a few tips and tricks when it comes to planning your business's future.
Select a Successor
Selecting someone to run your business in your absence can be a hard decision. Not only do you want someone who shares your goals, values, and vision, but you also want someone you can trust with day-to-day operations long before your planned retirement or departure date. This means finding someone just as committed as you are to your business.
If your business relies on its status as a women-owned business to gain access to government contracts, grants, and loans, it's important to find a successor who will help it maintain this status. "Women-owned business" means that women must own at least 51 percent of the business; if you'd like to sell your business to a male-female couple, you may need to structure the transaction so that a female successor has a greater share of equity than the male successor.
Value Your Business
While it might not be necessary to generate a specific value of your business today or tomorrow, it's important to have at least a ballpark idea of its worth. By knowing what your business could potentially sell for, you'll be in better shape to negotiate a sale or gauge the accuracy of an appraisal when it's time for you to move on.
Ensure Open Lines of Communication
Uncertainty can be one of the biggest morale killers in a small business. The last thing you want is for your staff to feel as though their jobs aren't secure or the business's future is uncertain. Engaging in succession planning without clearly messaging your plans and strategies can set the rumor mill ablaze.
Though you don't need to tell staff everything you're planning, or even openly identify your successor, it's a good idea to have regular meetings to discuss your business's future more generally. Make sure your staff knows you're open to their questions and concerns and aren't going to make any sudden moves without giving them a heads-up.
You'll also want to ensure you have open, honest communication with your prospective successor. It's a good idea to schedule regular check-ins on an annual or semi-annual basis to make sure you and your successor remain on the same page. Once you're a few years from retirement, it's time to work with your successor to create an exit path.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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Footnotes
1 “The State of Women Entrepreneurs,” https://www.score.org/resource/blog-post/state-women-entrepreneurs