An in-depth, strategic succession plan is crucial to any business’s long-term success, but-for a variety of reasons-many privately held businesses wait too long before putting a clear plan down on paper.
As a financial professional with 14 years of succession planning experience, I’ve compiled a list of ten tips on developing a successful plan for your business’s future.
It’s never too early to start planning for the future. Succession planning is time-consuming and occasionally creates discomfort between co-workers or family members, but it is tremendously important to be prepared for any unexpected events.
Develop (and write down) clear goals
Having a clear set of business goals and strategies for accomplishing them goes a very long way in ensuring your transition is successful. If you’re passing down a family business, make sure to separately consider the goals of your family, your business, and your senior management.
Identify the best person (or people) to take over the business
Even if you’re not close to being ready to retire or step aside, business leaders should always be thinking about their potential successors. Whether you’re the CEO of a public company or the owner of your own private business, you need to find somebody who has the talent-and the desire-to take over the company when you step aside.
Train your successor
It’s unwise-and unfair-to expect your successor to immediately step in to their new leadership role. Give yourself, and your successor, enough time to successfully transition.
Trust and empower the next leader
Many business leaders have a difficult time taking a step back and giving up some of their day-to-day control, but it’s very important that the new leader has an opportunity to lead. The key is to find middle ground between support and micro-managing.
The succession planning process should be as transparent as possible. All parties involved in the development of the plan should feel comfortable to communicate openly, and-when it’s time to execute the plan-every employee at every level of the business should be made aware of organizational changes.
Put everything in writing
Any and all decisions should be formally documented and legally reviewed.
Develop an exit plan
How is the current business leader planning to exit? Will he or she leave the company with a lump-sum payout? Are they gifting the business to their successor? It’s important to make these decisions carefully, as they will affect the company’s strategy moving forward.
Think about tax structure
When passing a business down to a successor, there are ways to minimize tax impact and maximize wealth transfer. This is another reason to start early: Many of these opportunities require advanced planning.
Create a governance structure
Appoint a board of directors who will be responsible for ensuring the business’s mission is fulfilled during and after the leadership transition. Transition periods can be difficult for any business, but a formal governance structure can help the process move smoothly.
An effective succession plan lays out a clear vision for how a company can survive across multiple generations of leaders. The time to start planning is now.
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