A beginner’s guide to succession planning.
Let’s face it: you won’t be around forever. Most of us know that, but not enough of us plan for it in either our personal and professional lives. So when the time comes for you to step away from your business – or if one of your key players decides to retire, or make a career change – would you and your company be ready?
Running a business is a consuming endeavor. It’s difficult to set aside time to plan for changes that may or may not happen, or for which their inevitability seems far beyond the horizon – but chances are, if you don’t have a plan in place, it’s probably been the source of some unwelcome insomnia.
Unfortunately, to add to the stress, succession planning can be complicated. It requires assessing everyone in your company to find the best fit; mistakes can be costly down the road. So, where do you even begin?
In general, there are two types of succession planning: for the next generation, and for replacing current senior positions.
What to consider when handing over the helm
Only around 30% of companies stay in business beyond the second generation, and that number is cut in half by the third generation. So, where do they go wrong, and how can you make the transition as smooth as possible? It starts with making a plan for transferring…
…your role in the company. While having a relative take your place might seem best for your family, it could be a death sentence for your company. If you don’t have a genetic heir to your throne already working alongside you, you’ll need to take into consideration who your best decision makers are, and start grooming them early on. The ideal candidate should have a commanding knowledge of the business and leadership skills you feel will continue your vision for the company well into the future.
…your assets. Typically wealth owned through your business is transferred to family members. Just as you would in a will, you’ll need to provide detailed instructions and specifically identify your beneficiaries. It’s recommend that you discuss your options with tax professionals to make your plan as financially efficient as possible.
The basics of staff succession planning
No matter how loyal we are to our employers, most of us feel the deepest professional loyalty to our own career – whether that be a change in jobs, or early retirement. Even your most trusted employee might move on – or you might someday need to terminate their contract. Here’s a start on how to make sure your plan-B is insomnia proof.
Nurture your staff. Hiring internally saves money, promotes a strong company culture, and requires less training. Each person on your staff has the potential to rise up through the ranks and become a leader. Try to recognize who has traits favorable for upper management, and put them in positions where they can learn and develop an understanding. That way they’ll be ready to take that next step, if and when the time comes.
Think outside your box. It’s easy to fall into the trap of working with people who think like you – they’re agreeable, and they see things your way, but when that’s the case, you’re almost always missing something. Consider mentoring employees who might think a little differently, who can add perspective to your endeavors, while still promoting your company values.
Plan it out. Establish your vision for succession and what your goals are, with a detailed strategy for how to achieve them. Rather than starting from today, work backwards from a hypothetical resignation, to the present, so you can identify the best route to take.
Get advice
Planning for the future can be stressful, short or long term. We’ve been working with businesses to plan for the future for more than 25 years and understand the complexities involved with succession planning. If you’re looking to sustain and grow your company’s financial health now and far down the road, contact us to learn how we can help.
