Effective business succession planning involves a number of stakeholders, including family members, senior executives and employees. Having an experienced professional facilitate critical discussions with candor and respect can help ensure that all interests are represented.
Putting a plan in place can also protect your business from unfortunate worst-case scenarios such as severe illness or accidental death.
Defining Your Goals
The first step in business succession planning is to identify a clear set of goals and objectives. These goals should be SMART (specific, measurable, attainable, relevant and time-bound). It is important to involve all key stakeholders in this process, including family members if they hold any interest in the company’s ownership and management.
This step should also include identifying any critical positions that are essential for your company to function. These positions are typically leadership roles that would have a significant impact on operations and strategy should they become vacant.
Identifying and developing existing employees for these positions allows you to promote from within, decreasing risk while also saving on the cost of external hires. It is also an opportunity to build team morale and create a sense of ownership among employees. This can help reduce turnover and quiet quitting. It can also increase employee retention, which can lead to better productivity and company culture.
Identifying Your Successors
Identifying potential replacements is one of the most important steps in business succession planning. It is a process that includes evaluating the current workforce, assessing their capabilities, and developing them into leaders by providing training and mentoring opportunities. Ideally, successor candidates should be identified and nurtured well before the business owner plans to leave. Using succession profiles and job descriptions will help make this easier.
It is also wise to plan ahead by determining the order of priority for various positions. This will make it clear which roles must be filled first in case a key employee suddenly leaves or the owner passes away.
A professional business advisor gold coast can offer insight into this decision making process. They can provide an objective viewpoint and offer a range of practical solutions for the business owner’s situation. They can also facilitate conversations with employees, family members and 3rd parties to find viable options that will be acceptable for all involved.
Developing a Plan
It’s important to make sure your successor is ready to take over the company and that your plan covers all the bases. This includes having a clear process for purchasing or otherwise transferring ownership shares. Often, this is accomplished through a buy-sell agreement, and the purchase of life insurance or an irrevocable trust may be required to cover this expense.
It is also vital to assess the value of your business prior to a sale. A thorough business valuation – using one of three common methods, including the cost, income or market approach – provides a valuable snapshot for your business and allows you to determine the fair price for any ownership shares you wish to transfer.
Once you’ve identified potential successors, it’s time to formalize their development by introducing them to mentors and providing cross-functional exposure. This will show your employees that you are invested in their career growth and can help alleviate concerns that they might feel excluded if they’re not selected for leadership roles.
Communicating Your Plan
Whether you’re looking to fill an open role in your business or prepare for your retirement, a well-designed succession plan will help you build and support your next generation of leaders. It can also help you develop new talent in your organization by promoting from within, which reduces turnover and hiring costs.
To begin developing your succession plan, forecast your company’s needs over the next five years and identify the roles and skills that will be needed. Gather input from team members, including their interests, strengths and career goals.
It can be a difficult topic to discuss, but business succession planning is essential for the health and future of your company. The unexpected death or disability of an owner or key executive can ruin everything you’ve worked so hard to build. A knowledgeable estate planning attorney can guide you in creating a strategy to avoid this fate. Moreover, a professional advisor can make sure your business succession plans align with your personal estate planning goals.
