As a business owner, it’s easy to get caught up in the day-to-day running of the business. However, it is important that you carve out time to plan for the future. A business succession plan allows your business to continue operating, even when unexpected internal changes occur.
In this article, we will run through the steps to create a tailored business succession plan.
What is a business succession plan?
A business succession plan is a written document that defines future management requirements. It identifies candidates who will take over in the event that yourself, or a key personnel, leaves the business (“successors”).
1. Have a clear goal
The first step in making a business succession plan is to understand what you want for your business. Do you intend on keeping the business in the family? Are you looking to expand in five years? Do you intend to sell in ten years? Your business goal(s) should be as clear and specific as possible. In doing so, you will be able to pro-actively plan for the future.
2. Reflect on your business structure
Secondly, you will need to identify key roles that will support the identified business goal(s). You should consider not only those who make the big decisions, but those who help run the day-to-day. It may be beneficial to create a business structure chart to see this visually.
3. Evaluate employee skills
Now that you’ve identified the key roles, you’ll need to designate potential successors. The number of successors required will vary from business to business. Generally, 2-3 successors for each key role is advised.
The evaluation process comprises of three stages:
- Determine what skills the company needs;
- Review the knowledge, skills and unique strengths of your employees; and
- Have open discussions with your employees about their career goals.
By understanding the gap between the skills you want, and the skills you have, you can create a training program. Alternatively, this exercise may indicate that you may need to bring in new talent down the line.
4. Training and Development
Employees who you have identified as being potential successors will need to undergo regular training. This will help the successor to develop requisite skills prior to assuming the position. As they hit certain goals, their level of responsibility should gradually increase.
The training program, along with what training initiatives are offered by the business, should be communicated to all employees. By being transparent about how to move up within the business, employees are able to see the benefits of staying long-term.
5. Actionable Plan
Once all the prep work is complete, you should consider how the transition should occur. Set out a realistic timeline that outlines the transfer of responsibilities and specific milestones.
At this stage, you may wish to consult with your financial advisor and lawyer. They will be able to help with the logistics and identify other matters that should be considered. This may include tax implications, valuation of the business, and changes in business structure.
Conclusion
A business succession plan is an investment in the future of your business. Its never to early to start planning and exploring your options. This process will involve asking some tough questions and exploring scenarios that you may have never considered before. A successful business succession plan should be realistic, flexible, and regularly reviewed.
When all is in place, you will have peace of mind knowing that your business will continue to thrive long into the future.
