According to Frank, while some business owners hire advisors to create a written plan creating a succession plan detailing when their entity will pass, who will take over and other pertinent documentation, documentation is not mandated for a plan to exist. When the plan is established to “create a perpetuation and a legacy of the business,” it is usually more formal in nature. Conversely, when succession is for retirement or estate planning purposes, a formal plan need not be written.

He cautions business owners that professionals other than lawyers can be useful when mapping out a plan for the transfer of a business. “Lawyers don’t hold all the answers. They should turn to trusted advisors,” such as an accountant or financial advisor, too, says Frank.

Pitfalls
While Frank does not perceive any glaring pitfalls with the notion of a succession plan, he cautions clients considering passing the business to future generations or even employees that sometimes, it’s just not always possible or realistic. “Sometimes there just aren’t family members or others who can become viable owners of the company,” says Frank. In those instances, a succession plan isn’t viable so a sale of the business might be in order.

Being realistic about the value of the business is equally as important to determining if the prospective new owners are viable choices. “It’s one thing when you want out of your business but what you may have invested in it might not be” attainable when a buyer seeks financing, cautions Frank.

Creating a succession plan can also inject stress into the family dynamic, especially when the heir apparent is not the person to be named as the company’s new owner in the plan. Also, says Frank, don’t forget about family members who haven’t worked in the business until now because they may perceive new ownership as a way of getting involved. He urges business owners to “plan to minimize stress and angst,”

What can prove fatal to a small business, says Elizabeth Potts Weinstein, a small business attorney in California, is not being prepared in case a company owner becomes incapacitated unexpectedly. “Many business owners don’t think of practical considerations that apply in the case of sudden disability. What would happen if you were suddenly taken ill –does anyone know your business email password? If you are a solo practitioner, could someone else manage your business banking for you if you were in the hospital? These simple logistics can undermine the value of a business in just a few weeks,” she says.

Top considerations
When formulating a succession plan, it is imperative to determine if the people named as successors really want to run the business. It is also imperative to determine whether those candidates possess the wherewithal to oversee the enterprise or else all your hard work was for naught.

Frank urges business owners contemplating a succession plan to “think ahead.” It’s lousy for an unprepared company owner to be forced into a succession plan that wasn’t thought through prior to implementation.

Being flexible is also key to a successful succession plan. “Go in with an open mind and listen to your advisors and stakeholders before finalizing” the plan, he suggests.

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Tami Kamin Meyer is an Ohio attorney and writer who tweets as @girlwithapen.