As a business owner, your succession plan is one of the most important plans you can have — but most leave it far too late.
A comprehensive succession plan will include financial, legal and other factors that set out what will happen as you move out of the business and someone else takes charge.
Understanding them is vital to making sure you have the best chance of leaving your business feeling satisfied with what you’ve achieved.
1. Start early
The main purpose of starting early is making sure you have a plan under all circumstances because sometimes circumstances dictate that you leave a business hastily.
Ideally, you’ll have a nice, smooth transition away from your business — but it doesn’t always work out that way.
Sometimes you need to sell a business for financial reasons or to spend more time caring for an ill family member. Starting early ensures that you have a plan to fall back on.
Starting early also allows you the time you need to review and refine your plan as the business changes or more information becomes available.
But it’s important to note that a succession plan can take several years to execute, so being thorough is a must.
2. Choose the right successor or buyer
What each of us looks for in a successor will differ, so it’s important to think about what’s most important to you.
In every succession or sale I’ve seen, the most important part of the exit strategy for the departing owner was to believe the same level of service would continue for their customers well after the owner leaves the business.
That can’t always be guaranteed and is often an unrealistic expectation.
When choosing your successor or a buyer, there’s a lot you need to consider beyond pure technical ability:
- Financial benefits (and costs)
- Ease of transition
- Continuity of service standards
- Future staffing requirements
- Personality and cultural fit
Some of these factors are easier to measure and predict than others, but they all need to be taken into account.
The more time you take, the more questions you ask, the more likely you are to make an accurate assessment.
The challenge here is to discover what is right for your needs and the future of the business.
Be as clear as you can about what the right things are for your business, even after you’re no longer a part of it.
3. Let it go
This step is particularly important and extremely difficult for most entrepreneurs.
You conceived and nurtured your business. It’s your baby. It can be very hard to trust that anyone else can care for it as well as you do.
Early in the life of Balance at Work, an adviser did me a great favour by asking me what my exit strategy was.
It was a confronting question because if you haven’t been asked the question it can be painful to be forced to consider the harsh reality of your business continuing without you.
If you’ve thought about your exit but avoided putting any structure around it, your plans are no more than wishful thinking.
Knowing how you would prefer to manage the transition is essential in any succession plan.
Whatever the circumstance, it is likely you’ll end up working in your (former) business alongside the new owner for a period.
The loss of authority might require a change of mindset for you, and for them if they were one of your team members before.
By agreeing on guidelines for managing the transition from owner to your new role, if you plan to stick around for a while, will help you avoid future tension and misunderstandings.
Starting early and knowing your goals will make it much easier to let go when the time comes.
By allowing enough time and choosing wisely, you may walk away with confidence and pride, rather than a sense of dread.
Are you ready to start your succession plan?
It’s never too soon!
Know your succession goals, enjoy the process and good luck!
This article was originally published on MYOB’s blog, The Pulse. For more business news and tips, visit www.myob.com/blog.