Preparing Your Business for a Successful Succession
You know how important it is to pick the right person for the right job when it comes to hiring and promoting within your company. However, this practice becomes especially vital when selecting someone to take over your business. Let’s take a look at some of the roadblocks you may face as well as ways to combat them. By the end, you’ll have a plan for a successful succession.
Common Roadblocks Faced by Businesses
Starting Too Late
Many business owners don’t start thinking about their succession plan until they’re thinking about their own retirement. This sometimes results in not having enough time to create a sufficient plan. While there is no cut-and-dried answer, on average, you should plan on an effective succession plan taking anywhere from 12 to 36 months from when you first start planning to completion.
No Formal Plan in Writing
While it’s important to include those involved with succession, simply verbalizing your plan isn’t enough. A written process, such as who will be taking on what, how important aspects of the business may be affected, and the value of your company should be included here. Never assume that important information, such as internal processes, is widely known. Include detailed information about everything about your role and responsibilities within your succession plan.
Not Having Professional Help
With a succession plan comes legal implications. If you’ve prepared to handle these issues from the jump, the transition will be a much smoother process. If you’re not already working with a business attorney by the time you start planning succession, this is a great time to start. Don’t forget about the tax implications! When a business changes hands, there may be additional taxes that need to be paid, which correlate with the value of your company. When this valuation process is done correctly, it will make figuring out how much is owed much easier.
Choosing Family as Successor
77% of small businesses in this country are family-owned, which can add an additional layer of difficulty when it comes to succession. In fact, almost 75% of family-owned businesses fail to pass beyond the first generation of owners, with that number increasing to 85% by the second generation, and 95% fail beyond that. These numbers can tie back to several factors, including family conflicts, informal leadership roles, lack of communication, and more. Before making a family member a part of your succession plan, have a meeting with them to gauge their willingness and desire to be a part of the next chapter of your business.
Pushback from Other People
Nothing can derail a succession plan faster than people pushing back against it. While you’re not going to make everyone 100% happy, make compromises where possible to get people working in tandem with the plan. For example, you can identify more than one person to potentially take over a role and then come up with a list of criteria with other decision-makers and narrow down selections that way.
5 Steps for Creating a Succession Plan
Every business is built differently, so, unfortunately, there isn’t a “one size fits all” solution for succession. However, there are steps you can take to help ensure the process is as rewarding as possible for everyone. A succession plan isn’t a one-and-done process. It should be thought of as a living document that needs to evolve with your company.
Pinpoint specific challenges your business may face
By identifying the challenges your business may face in the future, you can come up with the right moves to combat them beforehand. This can help your business save time and resources. Break these down into short-term, mid-term, and long-term issues. The more specific you can make this for your business, the better.
Identify other important roles
You know which members of your organization are critical to your success. In some cases, such as a retirement, you know in advance that an employee is leaving. However, it may also come as a surprise. Either way, it helps to have a contingency plan in place. The quicker you can fill these roles, the less likely you’ll have knowledge gaps.
Target potential replacements
Once you know which positions within the company will need to be replaced at some point, come up with a plan to find the best fit for the future. The best part is that the right replacements may not be too far away. There are several benefits when it comes to promoting from within, including improved company morale, lower costs associated with the hiring process, and more empowered employees. Don’t forget to include back-ups in the event your first pick is unable to take over.
Implement a career development plan
Once the roles and proper replacements have been identified, come up with a plan that’s as cohesive as possible. This should include the new person working alongside their counterpart and taking on more responsibility over time. Not only will this provide an employee with the opportunity to gain first-hand experience in the role, but it’ll help capture the knowledge needed to be effective in the role, so you don’t lose anything during the transition.
Finalize a transition timeline
Now that you have the pieces together, it’s time to put them into action. While you’ve taken every precaution during the planning, the unexpected can still happen. By creating a plan that can accommodate these hiccups, you’re more likely to stay on track. If plans keep getting pushed out, it may cause people to seek opportunities elsewhere, putting you and your plan back at square one.