Posted on November 18, 2009
Filed Under (Advice, General Business) by jennifer

This week I am happy to bring you a guest post from my colleague Nina Kaufman, a small business attorney and entrepreneur who runs, on the importance of  succession/transition planning for partners in a small business.

Succession Planning for Your Small Business: Begin with the End

How many times have you heard about business partners who rushed to launch their company, only to crash and burn mere months later because they hated working together? Millions of entrepreneurs in the U.S. have started their company with at least one other owner. And the success rates are . . . abysmal. At some point, your business partnership will end. Even if it’s because one or the other of you leaves . . . in a pine box 50 years later. That’s why it’s important to plan ahead begin with the end in mind and develop an exit strategy along with your start-up strategy.

And the first step to succession or transition planning is to think about and plan for what might cause you or your partner to need or want to leave the business and come up with different strategies for dealing with each possibility. These possibilities (or eventualities) include:

1. Death. Death doesn’t always occur when we prefer (in our dotage). What if your business partner gets hit by a bus tomorrow? How will you handle the blow?

2. Disability. Speaking of buses, what if your partner is in an accident or falls ill and becomes totally or partially disabled? How long can your company afford to pay the salary, benefits, and profits of an owner who can’t make the kinds of contributions (work and financial) that you originally anticipated?

3. Change of Heart. What if you won the lottery or came into an inheritance and suddenly had money to burn? Would you stick with the business or would you want to travel the world or do something else? Even without a major monetary windfall, is there a burning passion or higher calling that might pull you or your partner away from the business?

4. Family. Surprise! You’re 47 and pregnant. With twins. Or one of your parents, who happen to live 1000 miles away from you, is diagnosed with Alzheimer’s or some other disease and needs constant care. Will you have the time or energy to be as active a business owner as you were beforehand? Be honest.

5. The Last Straw. What if you and your partner just can’t work together any more, to the point where you’re fantasizing about pushing him or her under that bus? You’ve deadlocked and fought too often. Or worse, you’ve caught his hand in the till . . . or up your assistant’s skirt? How long will you put up with this?

Once you’ve taken some to and thought through reasons why you or your partner might need or want to leave the company, you can plan for an orderly transition (and fair buyout) when the event occurs. And by doing this in the beginning when you’re looking forward to the future, you can avoid a lot of anger, finger-pointing, and hurt feelings, the explosive ingredients that can lead to expensive and protracted lawsuits in any partnership break-up and save yourself considerable heartache and money.

Nina Kaufman demystifies legal mumbo-jumbo to save small businesses time, money, and aggravation. She’s also an award-winning business attorney, columnist/blogger for Entrepreneur Magazine online, and author of The Entrepreneur’s Prenup: How to Choose a Business Partner Who Won’t [Bleep] You, available through For a free copy of her Entrepreneur’s Business Law Primer, visit

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