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Who should succeed you as owner of your business?

Crafting a business succession plan gives your company a better chance of continuing on once you decide to step down or if for some unforeseen reason you cannot serve any longer as owner. Picking someone to take over for you will be a vital component of your succession plan.

Whoever you choose as your successor will depend upon the priorities you seek in a candidate. Ideally, the new owner should have the qualifications and skills to run your operation. Kiplinger describes some types of candidates entrepreneurs consider when drafting their succession plans.

A family member

Like many business owners, you may envision one of your children taking over for you. This can be a complicated matter if other family members have involvement in the business. Some entrepreneurs address this issue by drafting a succession plan that clarifies the responsibilities of the child who will succeed the owner as well as those of other members of the family.

Keep in mind that another child or family member may feel resentment that you chose someone else to lead your business. Explaining your reasoning and clarifying the responsibilities of everyone involved may help cool frayed tempers and possibly head off court battles over succession.

Existing employees

If a family member does not meet your criteria, you may follow the lead of other business owners and pick someone who already works for your business. This may work in your favor because an existing worker will likely have a good understanding of how your business works.

Still, your current employees might lack the skills to take on your management duties and handle your financial responsibilities. One way to handle this is to spend a few years training a successor to prepare him or her to assume ownership.

External candidates

The right person to own and run your business may not be someone who works for you. Some business owners search outside their companies for a qualified person to come in and assume a leadership role. Even if you find someone with some but not all of the skills you are looking for, you could still spend time training your candidate for eventual succession.