By John Corban
Five steps to create a viable succession plan for your business (This plan can also be used to sell your business)
Are you at a stage in your business where you have been thinking about creating a succession plan? Perhaps you can envisage handing over many of your responsibilities to someone younger who has similar enthusiasm and energy for managing and growing your business that you had years ago. Perhaps you are at a stage in your life where you want to spend more time travelling with your partner or enjoying a favourite hobby, while still overseeing your business once a month. Whatever the reason, you have worked hard at developing a business over many years and deserve to receive an income while your team operates your business.
Let’s look at the five steps to create a viable succession plan.
1. Determine the type of plan
What concerns are motivating you to develop your succession plan? Are you getting closer to retirement age and would like to hand-over the management of your business to a younger family member or member of your management team? Would you prefer to sell a percentage of your business to another individual and drastically reduce the time you need to work in your business? Clarifying your reason for developing a succession plan will help you create a plan that best fits your company’s needs.
2. Create a business strategic plan with goals and objectives
Your business strategic plan tells everyone, customers and employees, what your company is all about, where it’s going in the next ten years, and how it will get there. It will also include your team and their key roles, your marketing strategies (what has worked and what strategies your business will need to adopt), customer service strategies, a 3-5 year financial plan (including projected sales, expenses and profit based on the previous two years). Also, what systems and software will need to be developed, adopted or ceased over the coming years, and of course a plan for your service and products.
3. Identify a potential successor/s and their key role and responsibilities
You may have identified a family member or a member of your team as a potential General Manager or Managing Director, or you may not have such a person in mind who may come from an external source like a recruitment agency. Even if you don’t have the key person in mind at this moment, you can still create a succession plan which will also include a detailed job description of the role (which is a job description of your current role). Also, list the required skills and knowledge needed to fulfil this role that will replace you. Write a job description for every key role in your business and the required skills and knowledge needed. It seems like a lot of work, but your business should have this anyway.
4. Professional advice
When your plan has been created, meet with your accountant and discuss the financial plan with him and possible shareholder offerings, salary packages, profit share bonuses, and the possible buy in. Ask your accountant and/or another professional to look over your entire plan and give feedback. Amend your plan after considering the accountants advice and the other professionals’ comments. It would be helpful to engage a marketing professional and IT systems professional to give some advice about future strategies and systems needed.
5.Accountability to help drive this Plan
When your plan has been written, you need to create goals and a timeline, and select someone that you will be accountable to, so the implementation of this plan can become a reality. Later, when the successor has been selected, the implementation of your plan needs to be continuously monitored, evaluated and adjusted on an ongoing basis by your succession-planning team, especially when unexpected events will occur from time to time.
Note: Elements of this plan can be used to sell your business. Of course, when selling, prepare your business using steps 1-3, then decide on the amount of money you want for it and organise relevant legal documents.
Succession plans have worked for many small business owners, allowing them to oversee their business activities on a part-time basis and receive an income while they spend time pursuing other activities.
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