Business Succession Plan vs. Business Continuity Plan
Sometimes two terms sound similar, and most of us think that both the terms can be used in place of each other. However, most of the time it is not true. The same is the case with business succession plan and business continuity plan. “Business Succession Plan Vs Business Continuity Plan”, what is the first thing that comes to your mind when you hear the aforementioned phrase? You may say both these terms are similar. However, the objectives of both these terms and consequent plans are quite different to each other. A few questions may strike your mind when you think about both these terms. These questions may sound like; do they serve the same purpose? Is one more effective than the other? Which one is easier? And which one is better?
Moreover, you may ask whether both these plans conflict or complement each other, and whether a combination of booth these plans will work better for you? The only way to answer these questions is understanding the difference between both these terms thoroughly. That is why we have decided to elaborate on the difference between both these terms. Make sure you read it till the end to understand both concepts. Further details are given below:
Business Succession Plan Vs Business Continuity Plan; An Overview:
We will start from the basics and then move on to proper explanation of both these terms. Simply put, a business succession plan refers to the activity or process of making sure that your company is ready for changes in the leadership and management structure over time.
On the other hand, a business continuity plan is more like a strategy of ensuring the highest quality or standard of business with clients of a company, regardless of challenges that company is facing. Both these concepts may still sound complicated to you, but don’t worry, we will further elaborate on these concepts to make you understand these terms easily.
Business Succession Planning:
A business succession plan outlines a series of logistical and financial strategies regarding the person or entity taking over the business in case of retirement, death, or disability of an owner or a major shareholder. This plan helps you ensure a safe future for your business in your absence. To outline a succession plan, you need to determine an ideal successor to take over your business. Once you decide on an ideal successor for your business, it is now time to create a seamless selling arrangement. This arrangement generally includes a buy-sell agreement that is backed by an insurance policy or loan.
You can transfer ownership of your business to a co-owner, heir, key employee, outside party, or back to your company with multiple owners. The document of business succession plan includes step-by-step guidelines for a change in ownership. This document is intended to benefit all the parties involved in the succession plan by outlining the sale price and purchase terms. It also involves the timelines, names of potential successors, standard operating procedures (SOPs), valuation of the business, and the sources through which this succession process will be funded. A person should consider crafting a succession plan if the succession involves a complex process, continued contracts and repeated clients are there, and/or you have a successor in your mind.
Business Succession Planning Strategies
Common Types of Business Succession Plans:
When it comes to types of business succession plans, you will see a variety of business plans. Types of business succession plan usually depend upon the successor. Here are the types of business succession plans to make you understand the meaning of statement written earlier:
Transfer of business ownership to a co-owner
Transfer of business ownership to a potential heir
Transfer of business ownership to a key employee
Transfer of business ownership to an outside party
Transfer of business ownership in form of shares to multiple shareholders
As you can see, all these plans outline the party who is going to obtain the ownership of the business after you. This is why the types of business succession plans are dependent on the potential successor.
Business Continuity Plan:
This plan outlines the process of formulating a structure and system for your business to prevent and recover it from potential challenges to your company. This plan makes sure that your assets are safe and can function in case of any disaster or a potential threat. A business succession plan outlines all kinds of risks that can arise and affect the operations of a company. An effective business continuity plan serves as the key component in the risk management strategy of an organization. These risks may range from natural disasters to cyberattacks. Once you figure out potential threats, you need to identify the magnitude of their effect on operations, outline procedures to mitigate those risks, formulate procedures to taste the safeguards, and review the entire plan to make sure it stays effective over time.
Business Continuity Lifecycle
Types of Business Continuity Plans:
Here, we will list some types of business continuity plans that make sure your company delivers the same standard of services to its clients regardless of the changes and challenges it is going through. These types are given below:
Incident response plan
Business resumption plan
Continuity of support plan
Incident response plan
Disaster recovery plan
Occupant emergency plan
All these types of continuity plans are intended to make sure that your business is working properly and all its operations are functional, even in the worst of circumstances in terms of finance or because of any other reason.
Benefits of Business Continuity Plan Vs Business Succession Plan:
As you can see, both these plans carry an objective of ensuring seamless operations of business whether your business is going through the changes in its hierarchy or challenges arising because of potential threats. Advantages of Business Continuity Planning allows you to canary on the operations of your business and deal with your clients even if the conditions are not favorable for your business. On the other hand, succession plan allows your business to seamlessly carry out its operations without getting affected because of changes in the management rostrum.
Conclusion: Which is Right for My Business?
There is no point of thinking about business succession plan vs business continuity plan because both the types of business plans are aimed to ensure seamless operations of your business. Both these plans come with entirely different objectives, but with an aim to help you keep the future of your business secure. Both these plans can work in tandem with each other to benefit your business.
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If you want to formulate an effective business succession plan and business continuity plan, don’t forget to take advice from business litigation attorneys. A New York Boutique Law Firm like Kleyman Law Group can help you in this regard. We are available to serve you 24/7, just contact us and have your legal matters related to business settled in a quick time.