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The Importance of Creating a Business Succession Plan

Steve Ballmer, longstanding CEO of Microsoft, recently announced his intention to relinquish his position at the software giant by August 2014. The company's board of directors is already reported to be narrowing the list of candidates and aiming to have a successor in place by the end of this year. Ballmer's successor would be responsible for managing the company's transition as it begins to focus on devices and services, integrating the newly acquired Nokia mobile phone business and continuing to run the company.

While Microsoft is a giant among companies, smaller businesses also face succession issues. For family businesses in particular, an estimated 40 percent survive into the second generation, falling to a mere 13 percent in the third generation. In these cases, a smooth transition from the older generation to the new one can play a crucial part in a successful handover that avoids family rifts.

Ensuring the continued success of your family business

We recommend arranging succession at an early stage, when the outgoing director is in good health and fit enough to stay on board to train a replacement. By handing over the reins in this way, the outgoing director can make sure that guiding principles and key aspects of the company's methods of operation are maintained.

Whether a family member or an external candidate is chosen as the incoming CEO, support from staff and the board of directors is crucial to the continued success of the business. Clear and open communication between all parties is of paramount importance. To avoid future complications, it is also best to develop legal documents setting out each party's rights and responsibilities. When a retiring CEO retains an interest in a family business, it is advisable to define these rights clearly in a formal document to minimize the chances of any disputes.

A trustworthy and experienced business lawyer at Hess & Jendro Law Office, P.A. can help you plan ahead for business succession matters, ensuring a smooth transition for the future. We can assist with drafting any relevant legal documents and advise you about how to tackle issues connected to the transition.

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11070 183rd Circle NW
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Elk River, MN 55330

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