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Business Succession - 6 min read
As much as you love your business, at some point, you’ll make an exit. Most business owners leave their businesses when they retire or decide to pursue other interests. Some people withdraw due to illness or disability. Whatever the reason, you’ll need a succession plan that is reasonable and realistic.
The best succession plans do more than just turn a business over to new leadership. They also strengthen the company and position it for future success. When you start your plan early (maybe even years ahead of your planned exit), you can maximise your business value and take care of those you love.
Let’s walk through the succession planning process, paying particular attention to the people. Your business will need savvy leadership when you’re gone, so start prepping them now.
No two businesses are exactly alike. That’s why there are no set rules about what to include in your succession plan. Try hard, though, to make your plan realistic and achievable. Including your business adviser, accountant or lawyer in the planning will ensure that you’ve covered your legal and financial bases.
What kinds of issues should you consider?
Your business will need a new leader when you make your exit. But who? Do you have a qualified family member who can step up and take the reins? Does your business partner want to take over your role or find a new partner? Will you need to find a new leader from outside the organisation?
Another issue: what kind of succession best suits your company?
A partial sale and succession can iron out liquidity problems by generating cash that can be distributed to the parents. This strategy reduces the risk that they won’t be wholly compensated for their interest in the business when it’s sold.
A full sale takes care of the full succession all at once. It may work best when you’re not concerned about keeping the business in the family.
Life is unpredictable, but that shouldn’t stop you from making plans. The timeframe is critical to your succession plan’s success. It will help you to know which tasks to tackle next and give your team time-specific goals to achieve.
Business owners often manage various aspects of their company’s operations. It’s not uncommon for business owners to take their skills for granted and not realise how much they do to keep things running smoothly.
When you’re no longer steering the ship, what skills will the new leadership need? If you have to hire fresh talent, what specific skillset should you seek?
The changing of the guard comes with risk, but there are strategies you can use to minimise dangers. From adequate insurance to stable cash flow, take a look at your risk plan for succession.
Succession can be stressful, especially when people don’t know what’s going on. Keep everyone involved and informed by developing a communication strategy for the entire succession.
How will your succession plan affect your retirement income? What are the tax implications of your strategy? Work with your business advisors to answer these and other critical questions.
Succession planning goes beyond just naming names. You will need those names at some point, but for now, you can focus on developing leadership throughout your organisation.
We often use the term “supply and demand” to talk about assets and pricing, but it’s also helpful to think of staffing in those terms. At some point in the future, your company will have a demand for well-prepared leadership that understands the business and can carry out the firm’s vision.
To be ready for that future demand, you’ve got to work on supply today. Prepare your successors to be prepared for their future roles by cultivating their skills and training them to lead. The groundwork you lay now will determine whether you have a breadth of attractive choices in the future or you have to scramble to find a replacement.
As you draw up your succession plan, you may notice that you have “talent gaps” in your company. For instance, your senior marketing specialist may be dynamite, but when she retires, is there anyone who can step into her shoes?
Focus on developing the talent you’ll need, so you always have a pipeline of well-trained, skillful employees. Not only will you supply your company with qualified talent, but you’ll also improve each individual employee’s life.
We can help you to develop training programs for your employees. By formalising skill acquisition, you can create a robust base from which to draw as succession looms nearer. This isn’t just for your exit. Your partners, leadership, and employees will all make their exits at some point. Are you ready?
We’ve helped many businesses - large and small - create effective succession plans, and we can help you. Reach out to us at Altus to discuss your one-of-a-kind business. Wherever you are in your planning, we can provide expert advice, a sympathetic sounding board, and answers to your questions.
We look forward to talking with you.
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