Entrepreneurs and executives at higher corporations don’t often think about succession. For them, they are focused more on the short-term planning and execution of strategy than the long-term planning and where their position will be. However, it can stunt the growth of the business in the future. Often times when entrepreneurs or executives think about stepping back and preparing for their retirement, it means the end for them and their business. This statement couldn’t be farther from the truth, as proper planning is crucial to building the foundation for future success for your business. How can you plan your succession smoothly to cement your business with a prosperous future? Find out more below.
Before planning your succession, it’s important to understand why you are doing this in the first place. For starters, a business succession plan verifies your ability to lead, communicate, understand your emotions, establish your goals, and create the team that will help you towards your goals. According to Franchising.com, there are ten factors in a succession matrix that lead to a successful business succession plan, which not only impact each other but have a greater effect on the other factors. These ten factors include the following: family dynamics, successor preparation, management synergy and teamwork, strategic planning, business performance, business structuring, personal financial planning, owner motivation and perspective, family governance, and leadership/management continuity.
Another element of business succession is business performance. Business performance is based on the number of sales, the ability to lower costs, and profit margin. These numbers are stacked against industry standards to give you data about where you are performing in relation to your competitors. One important note that is not measured in performance is the value of the business. Value is not a tangible measure, as culture, intangible assets, and goodwill are not baked into the performance of a business.
Establishing value is the last key component of creating a business succession plan. Businesses often value themselves too high or too low, which can potentially cripple the company. Analyze all the different elements of your business to determine what your value is and how it will change in the future.