What is succession planning? Business succession planning is preparing your business for an eventual transfer of ownership in the case of your retirement, illness, early death, or other major life event. It might seem morbid, but much like making a will, a business succession plan is necessary if you want your legacy protected.
What Does Succession Planning Mean?
Business succession planning aims to ensure your business can operate successfully after you’re no longer involved. The process involves identifying potential successors, developing a plan for transferring ownership, and preparing for any challenges or obstacles during the transition process.
Business succession planning can minimize disputes among family members or other viable successors when the time comes. A succession plan also ensures that the business is transferred in a tax-savvy manner, reducing the risk of unnecessary taxes or fees.
Finally, planning can provide peace of mind. You can rest easy knowing that the business you’ve worked hard for will be in good hands when you need to step away, and your employees can focus on growth without worrying about what will happen to the company when you’re no longer at the helm.
How Do You Develop a Succession Plan for Leadership?
Are you ready to take charge of your business’s longevity? Here’s how to create a leadership succession plan.
The first step is to identify potential successors. Your options include transferring ownership to family members, selling the business to employees or a financial or strategic buyer, or even liquidating the company. Your chosen path should be made clear to all parties so there is no surprise or room for debate when the time comes.
I firmly believe that every leader’s unspoken responsibility is to identify, nurture, and mentor their ideal replacement long before there is a need to promote them. It’s not someone else’s job. It’s yours, and you must own it. If you don’t have a direct report with interest and potential, you must find and develop one rather than settle for less.
Next, you’ll need to determine the timeline for the transition. You might still need to decide on specific dates, but you can use benchmarks to document when the succession should occur. This can protect the business if you become incapacitated and cannot oversee the succession process.
It’s also important to consider the financial aspects of the transition, including valuing the business and determining the best way to transfer ownership. Most succession outcomes will require you to sell the company in some capacity. You must know how much it’s worth and how to do this properly.
Finally, please review and update your plan regularly to remain relevant. Your business valuation will change over time, as will much of the documentation you need to keep on hand, such as training documents, standard operating procedures, etc. Keeping this plan up to date will ensure clarity and save you some trouble when the time comes.
As a business owner, you want to ensure your business succession planning is watertight. A business coach can help. Click here to schedule a complimentary video meeting, and we can discuss what succession planning looks like for your company.