Succession planning is becoming a bit more fluid as business owners are more likely to stay in the workforce longer than past generations. Long past are the days when retirement was imminent at age 62 or age 65. Just because the “right time” is not set in stone, it is still critical that the business owner has a succession plan that is well thought out and ensures that the business will thrive. Here are a few tips to consider while thinking about a succession plan:
Start Early – A common problem in succession planning is that the process does not start until the plan is needed. A good plan will have framework 8-10 years prior to retirement. This will allow for quick action to be taken in the case of an emergency, such as an illness, and also allow for the plan to change with the business. The pressure of succession planning can be intense, early planning will relieve the pressure and let the business owner focus a majority of their effort on running the business.
Find Your Experts – In every business there are employees who excel at specific skills or tasks. As part of a succession plan, find those employees and help them develop that particular skill to an expert level. If there are multiple experts, part of the plan can be for them to pass their expertise on to their team to ensure that the business can sustain long after the principles are gone. Their experience as part of the team is very valuable, do not waste it. Instead nurture it and use it as part of the overall plan.
Be Honest With Yourself – There are many questions a business owner must answer as they look to walk away. One question is, “why do you think it is time to walk away?” Do you want to spend more time at home? Do you want to travel? Do you think it is just time to pass the business on? No matter the reason, the lack of a very clear answer can make the planning and transition difficult for both the business owner and the team through the planning process.
Understand That Planning Can Be Difficult – Part of succession planning is having some time to think about what is best for you as the business owner. Is it best to keep the business in the family? Is it best to leave it to the employees? Will the business thrive under new leadership? Understand and accept that keeping the business in the family might be a difficult decision. Perhaps children are still in school, or do not have the experience needed, or family has never been involved in the day to day. Ultimately, the business owner needs to feel good about the plan, regardless of what others may think. The planning process could include mentorship for family, or an increased level of involvement. Any transition is difficult, be ready to receive criticism for the decisions, but with proper planning the business owner can walk away feeling they have done what is best for everyone involved.
Walk Away – When it is time to execute the plan, be ready to walk away from the business. Maybe the plan calls for limited involvement through a transition period, or no involvement at all. No matter the case, it is up to the business owner to live up to their part of the agreement. If the plan calls for limited involvement, put an actual number of hours per week so there is clarity for both sides. When it is time to walk away from the business, walk away and watch your legacy grow.