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5 Keys To Successful Business Succession Planning

I was recently at a planning seminar for a small business owners. At the beginning of the meeting, the facilitator asked each of the business owners to hand over their cellphones.  As you can imagine, we were all reluctant, but the facilitator was well regarded and each of us had paid a lot of money to be in the room, so we complied.  The facilitator put each of the cellphones in a pillowcase, and then slammed the pillowcase on the table several times shattering all of the phones.  He then yelled, “You’ve just been hit by a bus, what’s going to happen to your business?”  He then pulled out another pillow case that held our phones.  They had not been smashed.  He had switched the bags when no one was looking.  But he made his point.  What would happen to your business if you were hit by a bus?  Or what would happen to your business if your top officer or a senior manager were hit by a bus or unexpectedly poached by a rival? What will happen to your business when you want to retire?

The unfortunate truth is that most businesses and business owners aren’t prepared for contingencies such as these. However, they need to prepare themselves with an adequate business succession plan. When the people they rely upon to run their companies move on, they do not have a successor in place with the necessary competencies to take over and ensure a seamless and painless transition. Perhaps you think your employees are too loyal to leave or that an accident is unlikely, but the fact is the unexpected happens all the time and if you are too naive to have a business succession plan you are putting your company’s future at risk. Business succession planning is essential, and if you haven’t got a plan, it needs to start right now.

These five keys will help you create a successful business succession plan and protect your company’s future.

1- Write It Down

Business owners are notorious for keeping important business information, policies and procedures in their heads.  That’s not going to do the business any good if you’re not around, so write it down.  Write it all down.  Every detail of every operation, procedure, policy and practice should be written down in a manner that would allow someone else to walk in and do the job.  If you have written policies and procedures in place, then even if you are unable to do your job, disruptions should be minimal.

2- Establish Clear Goals and Objectives

As with most plans, you need to start by laying out your goals. Are you putting this plan in place for a specific employee who may leave in the future, as a talent pipeline, or simply as a plan to handle whatever life throws at your business? Decide on things like how many hires you want to make and what path you want them to follow. Write down your objectives so you have a clear direction as you move forward.

3- Identify Key Roles

You need to look at the different roles in your company and decide which are the most important. What are the positions your company could not function without? What are the positions that it would be inconvenient to function without? These are the roles for which you need to create a business succession plan. Lay out the key competencies for each position and identify what characteristics would allow someone to be successful in those roles. It is critical that you know which positions are the most important to your company before you can begin to lay out a framework of possible replacements below them.

4- Recruit For Potential

When you look to hire new employees, think about the future and look for people that you believe could someday fit into the most important roles in your company. Simply put, make quality hires that have potential and demonstrate the types of characteristics and key competencies that you identified in point 2 above. You can create a database to keep track of these individuals that you will begin to “groom” as successors to major roles in your company.

5- Provide Relevant Experience

Once you’ve begun to make hires with the future in mind, make sure your candidates with potential are getting relevant experience to the role you believe they could someday take over. This business succession key will ensure that, when the time comes, the young talent you’ve put in place is ready to seamlessly fill in without much extra training. Give them opportunities to learn from the people they may someday replace.

Without a proper business succession plan you are putting your company at risk. As illustrated at the beginning of this article, the unexpected can hit at any time. Brown & Sterling can help you develop a detailed plan of succession so that you and your business are ready for when (or if) the unexpected happens. Use the business succession keys above and give us a call at (425) 222.6374 to start planning for your company’s future today.

Brown & Sterling

Brown and Sterling, P.S. is dedicated to helping small to mid-sized business owners and entrepreneurs of the Pacific Northwest. We’ve been advising businesses from formation through owner exits for over fifteen years. With a team of seasoned attorneys with expertise in business, taxation, employment law, and real estate law, our firm is uniquely situated to walk business owners through all of the intricacies of a business acquisition or sale.