When you retire, what will happen to your company? Do you intend to sell it? Will you pass it down to a child or another member of your family? Do you want to hand it down to someone you’ve been training for a few years?
Many business owners find the task of developing a succession plan daunting, especially in the face of day-to-day operations, marketing strategy, and the turbulence caused by COVID-19.
However, succession planning might assist you in regaining control. It not only helps you through the shift but it also enables you to solidify your mission, develop your top employees, and strengthen your current position.
In this blog post, we’ll share twelve tips for good succession planning that can give you confidence your business will be safe when you move on.
- Examine your business plan
You’ll have a hard time getting everyone on board if your succession plan departs from your long-held aims and convictions. That’s why, before you start thinking about succession, you should assess your business strategy.
You’ll reinforce the strong foundations you’ve built over the years by connecting your succession plan with your business strategy, and that basis will take you into the future. Now is a wonderful time to make modifications to your approach if you’ve been thinking about it.
- Think of development as a pipeline
New talent does not appear out of nowhere. Businesses that successfully transact successions develop in a “pipeline” fashion. When you have multiple qualified people waiting in the wings, you won’t be caught off guard if one of them decides to seek opportunities elsewhere.
- Make succession planning and recruitment work together.
Consider succession planning while hiring new staff; that way, you’ll take a holistic approach to your organisation. Is your company in need of temporary or long-term employees? What role will each individual play? What types of skill stacks can help your firm achieve long-term objectives?
- Be Open and Honest About Your Succession Plans
Succession planning is about ensuring that people can have peace of mind, not instilling fear in your employees about the company’s future. Staff members may believe that the company and their employment are in jeopardy at the slightest rumour regarding your retirement or the sale of the company.
Assuage your employees’ fears by communicating clearly, and explaining that succession planning is a way of reducing risk and maintaining the long-term viability of the company. They need to know that you have their best interests at heart.
- Maintain a flexible plan.
Consider the beginning of your company. It’s likely you will have had some turnover of staff over the years. The marketplace has shifted. It’s a very different business in many ways.
Keep the intricacies of your business in mind as you work on your succession strategy. Be adaptable and understand that the organisation will continue to change before and after the succession is completed.
- Think about all of your choices
Even if you’ve never made a formal plan, you’ve probably thought about how succession should work. Try to resist the urge to zero in on these ideas before you’ve exhausted all other possibilities. Many business owners are shocked by how well a different succession plan will work, but you must keep an open mind when weighing all of your possibilities.
- Concentrate on your abilities
It’s easy to pin all of your company hopes on one individual or group of people. However, realistically, those folks may not be available when you’re ready to leave, or they may choose to take a different path.
Instead, concentrate on the talents required to make your company steady and profitable. Teach your employees to build these abilities and actively pursue these competencies when hiring new personnel.
- Take into account both planned and unplanned events
The majority of people leave their enterprises when they retire, but unexpected occurrences can compel a departure. Because life does not always go as expected, it is prudent to plan for death and disability. Don’t put too much faith in chance. In many cases, business insurance can assist protect the value of the organisation you have built while also providing liquidity.
- Consider the tax consequences of your entity type
If your succession plan doesn’t account for the tax implications of your company’s structure, it’s possible that your transition will be hampered. Talk to a business succession expert about possible modifications in business structure and the tax consequences of each. It’s easier to shift entities now than it was in the past.
- Be aware of the possibility of customer churn
Client attrition is an important but frequently overlooked aspect of succession planning. Companies often lose some clients when the owner retires or dies, despite the successor’s best efforts. Prepare for customer attrition the same way you would for any other upcoming difficulty. Those plans will help to lessen the impact.
- Begin your succession planning early
One of the most common mistakes firms make in succession planning is to wait until it’s too late. Start planning today, even if you don’t plan to leave your firm for many years. Your strategy will guide your judgments and aid in the development of your successor.
- Enlist the help of a third-party facilitator
When it comes to drafting a business succession plan, a third-party succession facilitator is important. You have great ideas and a thorough understanding of your industry. Furthermore, you are aware of all of your team’s main players’ strengths and flaws. The third-party facilitator is familiar with your planning’s tax, financial, business insurance, and legal aspects and can assist you in navigating policies and regulations. You can work together to design a personalised succession plan that will help you reach your objectives.