You need a Succession Plan
There comes a time in every business owner’s life when they must decide how to transition out of their business.
Succession planning isn’t just a matter for the over-55s looking down the barrel of retirement, it is a tool every savvy business owner should use to maximise the value of their business when they want their involvement to change. Think outside the square when it comes to moving on from your business and take your time – the decision you make should be the best option for you and the best option for the ongoing success of your business.
So what is Succession Planning:
Succession planning, also sometimes referred to as succession management, refers to the continual business process of monitoring and developing management talent, and ensuring that future managers have the experience and skills they need to be successful. Unfortunately, for many businesses, both small and large, succession planning is something that is not being implemented in advance, but only in reaction to management changes. Not having an effective management succession plan can create stress on the business, reduce employee morale, can have a negative impact on revenue, and for public companies, lead to shareholder worries.
Here’s what the typical business owner will think about when it comes to a Succession Plan:
Selling all or part of their business is the only option open to many business owners. For those planning to sell their businesses, a succession plan will put them a step ahead of the pack – a necessary move given the oversupply of businesses on the market.
This can be a wise option for anyone with family members already working in the business who have a keen interest in leading the business into the future. However appointing someone who takes over out of a sense of obligation rather than a passion for the business is never a smart move. Be sure your wish to keep the business in the family doesn’t override what’s best for the business
3. SCALE DOWN
Another alternative is to allow existing partners or family members to run the business and to maintain a passive involvement. This can take the form of an advisory role,a place on the board or a part-time position within the company.
4. NEW PARTNER
If the thought of removing yourself from active involvement in the business fills you with joy, rather than dread, consider taking on a new partner and allowing them to run the business. As a silent partner, you still reap the rewards of being an owner in the business but you don’t have to be as active in the day-to-day operations.
5. HIRE A MANAGER
Appointing a competent manager can be the wisest choice for anyone who doesn’t want to relinquish ownership of their business but can do without the hard work that goes with it. A suitable manager will also add value to your business when it comes time to selling it.
It pays to be in the minority.
An alarming 94% of small business owners don’t have a documented succession plan at all.
Source: Cameron Research Group, The Australian Small Business Market for Financial Services: 2006
Succession planning can be a difficult and sometimes overwhelming task for businesses, especially since it is so easy to be focused only on current performance and growth. Thankfully, there are also a variety of succession planning solutions, tools,coaching and consulting options available for businesses, allowing them to quickly get an effective succession plan in place.
Effective succession planning is about ensuring leadership continuity and building talent by implementing strategies to identify and develop high-potential staff within the organisation. Succession planning demonstrates a genuine commitment to the development of the existing workforce and to ensuring that staff have the skills, experience and knowledge to meet changing work requirements.
Whether you plan to sell all or part of your business or hand it on, succession plan enables you to work towards implementing and refining systems and processes to the point that the business can run just as well without you as it did with you at the helm.