You take a lot of pride in your small business, but you can’t hold onto the reins forever. Eventually, you’ve got to start thinking about the future of your company for when you decide to walk away, and truth be told, you probably need to start setting things in motion sooner than you’d think. That’s where proper business succession planning comes into play.
A succession plan determines who will run your business whenever you decide to pass it on, and while planning for business succession may seem like a daunting task, if approached thoroughly and early on, it will end up doing you a world of good in the long run.
Consider Hiring an Advisor
In order to maintain impartiality throughout the entire business succession process, it would probably be a good idea to hire some sort of third-party advisor.
A quality advisor works with lawyers, accountants, and other business specialists to lead you towards decisions that are ultimately in your best interest, while also maintaining an air of objectivity that more emotionally invested parties may not be able to provide.
All told, a business succession planning has plenty of moving pieces and having a trained professional guide you through the more complicated parts of the process, such as company valuation, will help to effectively streamline the process.
Picking the Right Successor for the Job
When picking the right successor, you want to look inside your company for employees who seem to truly understand your business and who also exhibit strong leadership skills. If you have a family run business (a type of business which currently accounts for 50% of the gross domestic product in the United States) or simply employ several close friends or family members, this decision can be an especially challenging one since emotions will clearly be involved.
If you’re having trouble deciding on a successor for whatever reason, it may be a good idea to take your decision to a third party, such as your board of directors or an outside search committee. They can approach this task from an unbiased perspective.
Experts also say that it’s a good idea to start looking for a successor at least 15 years before you retire so that you can give them ample time to grow under your supervision.
Consider Establishing a Successor Training Program
Even if your chosen successor exhibits all the right qualities, you want to make sure that whoever you choose is properly trained to take over when the time comes. Developing some sort of training program then is crucial to your successor’s success.
In this training program, you’ll want to encapsulate the scope of your business’s day-to-day operations and truly immerse your successor in the ins and outs of your company. Have your successor engage in functions and oversee tasks that you yourself would, particularly as they relate to your business’s culture as a whole.
Keep a watchful eye, but try not to interfere too much as it’s important for your successor to learn from as much hands-on experience as possible and to grow through any mistakes.
Establishing a Timetable for Business Succession Planning
After your successor has made positive steps in your training program, you need to establish a sort of timetable that lays out when your successor will exactly start assuming duties and in what capacity. What you don’t want to happen is for your successor to start making decisions and executing strategies when you’re not quite ready to pass the torch.
A timetable’s effectiveness is twofold: it motivates your successor by offering a sense of finality to the process and it prepares you to make the next step.
It’s Never Too Early to Start Planning Your Retirement
While it may seem like you’re putting the majority of time and effort into your successor during the business succession planning process, it’s important to think of yourself as well.
Even before you ultimately phase yourself out of your business, start planning your retirement. It’s never too early. Think about that next step. Get your financial affairs in order. Take time away from your business, whether that means going on a vacation or even planning another business venture.
This will help give you added peace of mind and also help your successor grow in confidence as you start to take a less active role in the business.
Knowing When You’re Ready to Execute the Succession Plan
Business succession planning can be an extensive process, but the hardest part can be executing that succession plan and knowing when to walk away.
Keep in mind that it’s important to implement this entire plan both gradually and methodically, which is why getting an early start is crucial. From picking the right successor to eventually moving that person into the fold, it’s all about slow and careful development.
Once all of that is complete, you should be ready to turn your company over and move on to that next step.