As a business owner, do the following questions weigh on your mind?
- Would your business be unable to cope without you?
- Do you worry about recovering your investment (and more) when you exit?
- Are you concerned about the expectations your family may have for your business?
- Do you have clear expectations and goals for life beyond your business?
- Do you know what’s required to support your lifestyle after you’ve exited your business?
If the answer is yes, I need answers, you need a succession plan.
Let's start with what succession is
Succession is what happens to your business when you ultimately decide you want out, whether that’s in 12 months or 50 years.
Succession Planning sadly isn’t just about retirement. What would happen in an unforeseen event? Would the operation, management and value of your business be compromised? How seamless and pain free would the transition be - both for your business and those who rely on it?
Succession Planning is an extremely valuable exercise for when you plan to retire, or even if you’ve already lined up your successor. And if the unexpected happens, this planning will downgrade a major crisis to a significant, but manageable, event.
By having the conversations now and documenting clear intentions, you are helping yourself as well as your stakeholders and family.
The purpose of succession planning
Planning your succession allows you to transition your business to new ownership in a managed and systematic way, helping you to reduce stress and achieve a greater outcome at a potentially tricky time.
Succession Planning is about clarifying what you want for the future and defining the steps required to turn that vision into a reality, while taking into consideration business, personal, and family expectations.
Planning for an owner’s inevitable exit from a business is too often left to the last minute, strongly impacting the size of the nest egg. It’s crucial to consider Succession Planning as an important aspect of your overall business strategy that requires regular reflection and ongoing development.
But I've already identified my successor
There’s a big misconception that if your successor is poised to take over, you don’t need to plan. Be that a management buyout or a family member, there are a lot of expectations, logistics, and legalities to manage to ensure a smooth transition for everyone (including your customers).
It isn't just about securing your future
It’s also about efficiency.
Planning for unexpected scenarios forces you to assess who does what, why, and how they do it best:
- Is the right person performing the task?
- Is their process the best way of doing the job?
- If multiple people perform the task are they doing so consistently?
- Have we defined and documented the best process?
- Should this task be the responsibility of a single team member?
It’s about providing a safety net for your team.
Documenting the key business processes in your company enables you to devise the most efficient system for each task. Having a clear procedure to follow is helpful when a team member is absent, but most importantly when it comes time to transfer this knowledge to a new team member, manager or owner.
A robust and effective Succession Plan takes three to five years from initial planning to implementation.
Having said that, any plan is better than no plan. Generally, the longer you have to execute your plan, the bigger the opportunity you have to maximise the value of your business and therefore the capital you extract on exiting.
A Succession Plan is not something you write and leave to rot in a dusty drawer. Succession Planning is an important part of your business strategy that requires regular attention and ongoing development!
Involving key team members in aspects of planning will engage and empower them as the journey begins.
Regardless of your situation, a carefully considered exit strategy will reflect the hard work and capital you’ve invested in your business and ensure strong foundations for the future.
We can help you develop your Succession Plan to ensure that the expectations of all parties are achieved. Get in touch If you’d like to know how.
