Succession planning is the strategization of passing down ownership to a successor upon retirement, changing careers, or passing on. Succession planning ensures your business continues to operate under capable leadership according to your preferences, mission, and values.
Succession is an internal transition: you will maintain a lasting legacy within your organization next season by choosing a successor who aligns with your vision, mission, and values – and creating a succession plan is advantageous in a voluntary or involuntary exit from your business to ensure the following stewardship meets your stipulations.
A solid succession plan relies on early planning and strategizing for a smoother execution. Below are some other critical tips for creating a good succession plan.
Identify and Discuss Financial Plans With Your Successor
Succession is usually a gradual exit strategy, so you maintain influence over company operations and decisions. Whether your successor is a family member or one of your key employees/managers, you create a financial plan for the successor to pay for complete ownership of the business.
Identify your resources: for example, partners in a business may obtain life insurance to name one another as beneficiaries, providing the finances to purchase the company’s share if one partner passes away.
If you aren’t sure about what financial plan is optimal, seek professional assistance. I create financial projections for my clients to determine the revenue needed to fund the transfer of ownership and advise you on pursuing the most necessary professional resources for cost efficiency.
Choose a Promising Successor Based on Skill Development
If you are establishing a family business, choose a family successor willing to learn and capable of leadership. If you prefer an employee or manager as a successor, they should demonstrate leadership abilities and acquire extensive knowledge about running your business. Ideally, you’ll have a list of potential successors in order of preference.
Use Strategic Plans to Accomplish Your Objectives
We know how strategic plans help us accomplish mid and long-term goals: include a strategic plan to improve operations, cultivate higher productivity, achieve performance goals, and more to optimize your business for succession.
Consider Incorporating Change Management
The shift in ownership will likely come with a few changes in daily operations, workflow, and processes. Although the benefit of succession is maintaining your business culture and values, you will likely optimize areas of your business before and during for expense reduction and enhanced infrastructure, as your successor will experience more advantages in inheriting an optimal functioning company.
Change management is a great way to prepare your team for the change in ownership, so the business can continue running efficiently without causing confusion, stress, and worry for the staff about the process.
Business owners seeking to create a succession plan can book a consultation with me today. I look forward to helping you establish a meaningful legacy with ease.
