Why succession planning should be top on your list
Some
business owners don’t want to think about it. While for others, it’s
all they dream about. What are we referring to? - The day you step back
from your business - be it to retire due to health reasons, a sudden
life change or a decision to sell up. Irrespective of the ‘why’, exiting
your business is an event that requires a substantial investment of
time, pre-thought and planning.
Why plan your exit?
Firstly – there’s so much at stake! Have you ever thought about what
would happen to your business if for some reason you had to unexpectedly
step down from your role? Who would assume responsibility in your
absence? Have you considered what impact that loss of expertise,
continuity and business knowledge would have on your relationships with
clients? Or how long it would take to find and train someone who would
be an adequate replacement?
Generally, most business owners are
‘it’ in their business and they don’t think about what would happen if
they weren’t at the helm. Mostly, without them heading up the company,
the whole organisation would stop, which is certainly not ideal for the
longevity of any business. There are other important reasons why
planning for your exit ahead of time is so vital, and these reasons will
vary depending on the type of exit you’re aiming for.
The two types of succession plans:
- Buy-sell Planning: Preparation to sell the establishment to other business owners, key employees or interested outsiders.
- Retention Planning: To ensure ownership of the business remains within the family circle (and can be run effectively this way).
Set for life
The first of the two options above requires critical planning right
away. After all, if you’re planning on retiring to life the good life
aboard a luxury yacht somewhere in the sun, you need to make sure well
in advance that you maximise the value of your business and develop it,
such that its sale will be able to meet your autumnal year needs. This
means that within your succession plan you’ll need to include action
points to grow and manage your business, incorporated into achievable
timelines.
The big ‘hand-over’
If you’re looking at the second option, it’s imperative to involve
the business partner, family member or senior executive that you intend
to hand the torch over to in the planning process. Their input will
ensure that you have a smooth transition between leadership, minimising
any disruption to your operations.
Strategies for success
For example, if you’re planning to retire but retain ownership of the business, you need to ensure there are suitably experienced and capable employees who can move up the ranks over time, filling the key and/or critical roles as they become available – (this is a process that should be taking place years in advance of your exit).
Progressing suitable employees through the organisation to managerial and leadership roles will also require you to provide ongoing training and development, as well as opportunities for staff to acquire the experience they’ll need in more senior positions. What’s more, this ongoing approach to succession planning allows you to identify lynchpin roles/gaps in talent and respond accordingly, which has huge impact on employee commitment, overall performance, long-term growth and reduces reliance on external recruitment methods.
Succession planning isn’t something that can be left to the last minute – ask your accountant today for advice on what type of plan will be best for you. While you’re there, ask for assistance in developing timelines and strategies for managing your operations and staff to help you achieve your ultimate goal.
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