Planning for business succession is vital for the future of the business. The succession plan gives the owner a clear vision of the business objectives and how to achieve them. A business owner should be less subjective in succession planning, especially if it involves leaving the business to a family member. Here are three steps to take before succession planning.
Define the Vision of the Future of the Company
Business owners should be clear about the future of the business. They should have an honest conversation with themselves at the time they intend to stay in business. They should also understand whether they intend to exit the leadership positions or assume other roles. Having this assessment can help the owner begin the process of succession planning.
The business owner needs to make decisions concerning the business succession early enough to ensure a smooth transition of the business. Having a succession plan does not mean that the business owners cannot sell the business if conditions are warranted.
It is advisable to have one or more successors once the owner has decided to retain the business. Choosing the successors in advance ensures that the company will thrive past the owner’s involvement. An outsider can be groomed to succeed the owner in an event where there is no qualified or interested family member to take over.
Succession may be apparent to some family members, which makes the process easy. However, others have to be persuaded or given time to decide to join the business. Heirs who have previously worked in the industry are more likely to thrive and gain more respect from employees in the family business.
Having regular conversations with potential successors is imperative in verifying that they are the right fit. Potential successors should possess competence, credibility, team building, integrity, courage, and flexibility to change and make plans.
Plan for Contingencies
Being prepared for unplanned events can contribute to the future success of the business. The success of a family business depends on the owner, which is a problem since many risks are concentrated on one person. The owners must separate themselves from the company during planning to ensure the business’s success in their absence.