Succession planning is the strategic process of identifying the future leaders of your business; those who will take over when current leaders step down.
Succession should be treated with the same importance as growth strategies and strategic business planning; creating a clear, defined vision that ensures a smooth transition between leaders, both for the business and for stakeholders.
It is never too early to start planning your business succession. Plans can be adapted, changed and refocused, but they are essential in providing structure and support to your decision making.
For some entrepreneurial business owners, however, succession planning can present a challenge when planning to pass on their business or exit.
Building a successful business takes a great deal of hard work and determination. For many, the day to day management can often leave little time to step back and focus on the future vision of the business and personal aspirations.
The problem with failing to create an orderly plan is that change happens fast. Business owners may not get a second chance if their business fails to adapt quickly when key leadership leave.
Ensure focus is given to the opportunities and risks involved with business operations, both now and long-term, making sure these are built into your succession plan.
Here are some key steps to follow when planning successful succession
1. Think about your personal objectives
Assess how your personal objectives fit within the future of the business and succession. It is important to ensure that the succession route developed incorporates and satisfies these both now and in the future.
2. Agree a timetable
When you have decided that the time has come to hand over the reigns, it is important to make sure that a clear timetable is created, and communicated to the leadership teams as appropriate.
This timetable should be clear and concise and have action points that are completed throughout the process as opposed to leaving everything until the last minute.
3. Identify the skills required and the candidates who are applicable
As a business owner, you will already have a vision for your business and its future success. It’s important that your proposed successor’s skills align with this vision, and that they have the drive to achieve it.
If you cannot find a successor within the business, you may want to look externally and, at this point, the timetable may need to be updated.
4. Managing the skills gap
It’s imperative that those in senior positions begin to pass on their knowledge and transfer key relationships with stakeholders to their successors early, so that their skills do not leave the business when they do.
Developing the successor’s knowledge of the business across all areas will give them a greater understanding as to how the business operates and how they should lead it when you move on.
5. Communicating with the business
Once you have selected your successor you must communicate transition requirements to the wider management team. This should be done as soon as possible to ensure the business is ready and there is a smooth transition between leaders.
It is also important at this point to communicate with clients/customers/suppliers about the changes that are coming.
6. Smooth transition
With new leaders in place, you should move away from the day to day operations of the business, so they become established in their new role.
This transition to new leaders will assist with driving benefits for the future of your business including new ideas, enhanced value and improved opportunities for equality and de-risking.
As you transition to your new venture or into retirement, it is important that you now focus on creating a strong financial plan for your future to ensure your personal finances are protected.
Benefits of succession planning
- Helping you to plan for the long-term, creating a strong vision for the business.
- Enhanced business value through a transition of responsibilities away from the business owners.
- Ensuring that the legacy of the business continues when leadership is passed on.
- Protection of the business in the event of an unexpected illness or absence by ensuring someone is ready to take over in the short term.
- Creating a continuous income stream in retirement.
Over the next four months, as part of our Success to Succession series, we will delve further into the topic of succession from an entrepreneurial business, family business and individual’s perspective.
Topics we will cover include:
During this time, we will also be holding events in many of our local offices, covering topics on business succession planning and Inheritance Tax Planning (IHT) two important aspects to consider when thinking about passing on your business.
More information on these events and our webinar can be found here.
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