If you’re a small business owner, succession planning can help you to find the most suitable strategy to sell your business or pass it on to someone else, whether it’s another entrepreneur, a friend, a family member, or an employee.
A successful succession plan can help simplify the process of transferring your business. You’ll be able to maintain positive working relationships with your employees, business partners, and clients. In addition, succession planning can help you to maintain the value of your business, offer financial security for your family and business stakeholders, protect the legacy and reputation of your business, maintain your business’s role in the community, deal with unanticipated events, and prepare for the future.
When Should You Start Planning?
If you’re planning on retiring or exiting your business, you should start planning as early as possible. In some cases, exiting a business can take up to five years—the longer you wait to start planning, the longer you’ll have to wait to transfer the responsibility to someone else’s shoulders.
A succession plan should address important questions, such as your goals and objectives for the business, as well as your personal goals and objectives post business ownership. Where appropriate, you may want to involve trusted family members and/or employees in the decision-making process. In this case, you’ll need to identify a method for resolving conflicts between various stakeholders, including your partners, employees, and family members. Keep in mind, you will need to choose a successor.
You may need to provide your successor with training for core skills and/or competencies. You can include this in your plan. In addition, you’ll need to plan for contingencies, identify the market value of your business, create a timeline for your exit, and perhaps even follow-up with your succession plan after you’ve carried it out.
Are you running a family business? You might want to keep the business in the family and transfer it to another family member. But identifying who you should transfer the business to isn’t always easy. In addition, your decision may have an effect on your relationships. It’s important to identify the candidate(s) and discuss your plan with them before you proceed. You should work together during the transfer and sale of the business to a relative.
Your employees and staff members should also be part of your succession planning efforts. This type of change can be difficult for long-time employees to accept, but planning ahead can make the transition easier for everyone involved. In addition, you’ll want to make sure that you choose the right candidates to carry out your organization’s vision.
Your company’s established talent management procedures and processes can be used to help identify and develop the employees that will assume managerial and senior managerial roles in your absence. Whether you decide to sell the business to a friend, a family member, or a third party, you’ll want to ensure that it continues to run smoothly both throughout the transition period and after.