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Successful succession planning print Print

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Every owner would like his or her business to thrive into the future. Effort and hard work will ultimately be rewarded with a smooth transition to a new owner who carries your business legacy into the future.

Succession planning is often overlooked. Running a business consumes significant time, energy and thought. It’s difficult to find space in the day for succession planning when you already need to worry about increasing revenues, attracting and retaining valuable staff, and staying ahead of the competition.

Although you may not always like to admit it, there will be a time when you leave your current role.  You might retire or transition to a new job, you could get sick or need to care for a family member. Whatever the case, you want to know your business will continue to grow when you are gone. The reward for a successful succession is worth the effort because you will build a business legacy that can last for decades. 

Get organised early

Effective transition takes time. Therefore, it is important that you start planning and preparing early. If you wait until the day you decide to retire, it will be too late. Once you have a rough idea of timing you can begin building an exit strategy.

You might want to leave completely, or you might choose to stay and help the new owner find tier feet. Spend time identifying trends in the industry, potential candidates who could replace you, and developing the core values you hope to see continue when you leave.

Starting your succession plan early also provides great insurance. If you need to leave suddenly, whether by choice or circumstances outside your control, your business will already be prepared for the transition. You can never start too early. After all, do you think your replacement is more likely to succeed after ten years of training or ten days?

Groom your successor

If you’re passing the baton onto a family member or someone on your staff, you must do everything you can to prepare them for their new leadership role. Passing the business onto a family member can sometimes be difficult as everything feels more personal, but it can also yield excellent results. Make sure they have a genuine desire to run the business and aren’t just trying to make you happy.

Whoever you choose as your successor, you cannot assume they know how to run the business as well as you. This assumption is one of the reasons that only 30% of family businesses survive into the second generation. Things that have become natural for you over the past years may not yet be natural for your successor. 

There are four essential steps to preparing them to replace you:

1)      Give your successor opportunities to watch how you work. The more they see you, the more they will learn. Explain to them as much as you can: why you perform specific tasks, how you spend your time, what you consider in decision-making and so on.

2)      Start allowing them to make decisions and taking action, but give continual guidance. Ask questions, give answers, and work together on projects. Encourage them if they do something well. If they do something wrong, then correct and coach them.

3)      Take another step back and give them more chances to make decisions and take actions. Instead of giving continual guidance, simply make yourself available for advice and encourage them to share what they learn. Allow them to make mistakes. Although it can be scary, they need to learn how to respond to failure.

4)      Give your successors total control. Encourage and empower them so they truly believe they have ownership. They need to be confident they can run the organisation without your guidance, and you need to rest assured knowing your company is in good hands.

The last part is one of the greatest challenges for most entrepreneurs. Unless specifically asked for help, you need to walk away and allow your successor to perform the job.

If you train your successor well, you will build a lasting legacy for your business. Not only will your successor run the business effectively, but they will also have the ability to train a successor themselves and prepare for the day they retire from the business.

Assemble a changeover team

You don’t need to do everything alone. Assembling a changeover team will help with the change of ownership. You can start by consulting experienced experts who have been a part of successful successions. These might include lawyers, accountants, business brokers, and trusted colleagues. You can also involve members of your staff team who will help contribute to a planning a successful transition.

Once you leave, some of your changeover team might stay with the company. Work with them to define a decision-making process and solidify the company’s keys to success. The more people who understand how you operated the company, the more likely the core values and mission you worked to create will remain.

Identify the right price

You have worked hard to build your business and probably deserve a good return. At the same time, you want to be reasonable with your friends, family, or employees who have decided to buy the company. Essentially, you need to find a balance.

You don’t want to scam your family or friends with a bad deal and you don’t want the new owner to inherit so much debt the company suffers. But you want to ensure your work is recognised and the new owner will be dedicated to the success of the business. Setting a fair price can benefit both parties. It will ensure the new owner is truly invested in the success of the organisation, and you will enjoy a financially successful exit.

Overcome the barriers

Overcome any barriers that may keep you from planning the eventual handover of your business. There will be distractions, there will be naysayers, and there will be headaches. Your business legacy, however, is too important to allow these hurdles to stop your work.

Seek the help of advisors, work with trusted members of your staff, and plan ahead so that when you must walk away from your business, you can walk away with confidence in the company’s future.

By adhering to the above succession advice, you can move onto your next phase of life with satisfaction.

Next Steps:

Learn more by reading Succession planning made simple and preparing your business for sale or transition.

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