5 steps to successful succession planning
Succession planning is essential for every business. Whether that business is family-owned, a partnership, a not-for-profit, government agency or a private or publicly owned business.
Pitcher Partners’ Business Radar reports show that businesses who succession plan are more confident in their decision-making processes and about the future success of the business.
Many businesses fall into chaos, are sold at less value or do not continue as their owners wished – all because of a lack of succession planning.
Despite this, many businesses don’t have a formal succession plan. Planning for the succession of your business takes time and effort. Following the right steps and getting good advice, it is an investment worth making.
Here are the five steps to successful succession planning for business.
1. Know your goals before you start
Think about why you are planning and the outcomes you want. Is it about imminent retirements or prudent long term business planning and risk minimisation? Are you a family business owner wanting to pass the business on to the next generation. Or entrepreneurial and looking to divest a start up so you can begin another exciting challenge. Do you want or need to diversify or change your business to remain viable? Succession planning is part of any good change management program or plan.
Think about what culture or legacy you want to continue or to change in the business.
These things help determine your preferred succession options which could include bringing in new talent, selling the business to new owners or a competitor, handing it to a son or daughter, an employee buy out or share plan, or bringing in a co-owner or new partner(s).
2. Time your succession planning right
Be proactive rather than reactive.
Many businesses only look at succession planning when it is too late – after someone leaves the business or an unexpected event requires a business to be sold quickly.
Successful planning takes time. A good succession planning process looks ahead three, five or 10 years.
3. Choose the roles and the right successors and bring all employees along with you
The next step is to identify the roles critical for succession planning and the right successors. Those people may be in the business or the family but may need professional development and training to be successful in those roles.
Do the internal people you are identifying want to be part of the plan? Our business advisors work with many family-owned business clients and increasingly see that the parents expect the next generation to come on board but have never had that conversation. It doesn’t end well if the next generation want to forge their own path in a different sector.
You may need to bring in new people and give them time to learn the business. Integrate your succession planning with your recruitment or hiring strategies.
Bring all employees on the succession journey – not just chosen successors. If your employees don’t understand the reasons for the succession plan and the details, they often don’t buy in. You run the risk of key staff leaving the business when changes are made.
4. Have a formal business succession plan and review it
A formal, written plan for succession ensures everyone is on the same page. The plan needs to outline the actions you are taking, who is responsible for those actions and the timing. It should be clear about exit planning where it is known that key individuals are leaving the business. That exit plan needs to include communication with staff and customers.
Have options or at least a Plan B. People and their circumstances change, and your business goals or needs may change too. This is why you also need to set regular reviews of the plan.
5. Use expert business advisors to make succession planning easier and effective
Succession planning can be made easier and more effective by a good team including a lawyer, accountant, banker and business advisor. Our team of business advisors have worked with many clients with differing succession planning needs. We know what works.
Identifying critical roles, people and future skill sets can be helped by a fresh set of eyes.
The multitude of succession planning options all have different legal, tax, wealth and cost options. Getting the right structure and finance options are critical.
Business advisors can also assist those exiting the business with due diligence, retirement planning, superannuation and estate planning.
Got a question about succession planning for your business?
We love questions. If you want to know more about Pitcher Partners Newcastle and Hunter’s succession planning consultants, please contact us..
