A succession plan is an essential part of a business owner’s success. It provides an outline of who to replace if the business owner decides to retire or otherwise leave the company, and it also helps prevent the loss of top talent to competitors.
A successful business succession plan is a complex process that should be handled by professionals. In many cases, this includes a CPA and an attorney to draft the documents needed for the plan. For smaller businesses, a local accountant or CPA may be able to help, but larger enterprises typically seek the assistance of an accounting firm with experience creating business succession plans.
Developing and Training Candidates
One of the most important aspects of any business succession plan is identifying and developing potential leaders within the organization. This reduces turnover and hiring costs, and it also ensures that your future leaders have the necessary organizational knowledge and internal relationships to carry on with the business.
To start putting together your succession plan, take stock of the positions that need to be filled in the business. First, identify which roles are critical to your organization’s mission. Then, evaluate each position and consider the skills of current team members that are capable of filling the role or that have potential to grow into it over time.
If possible, interview prospective candidates for their goals and commitment to the business. You want to find out if they’re interested in moving into a leadership role, if they’d like to get more exposure to different areas of the business, and what skills they need to develop for the job.
Next, you need to identify a plan for the training of these future leaders. This can be done by providing formal training or through mentoring and coaching programs. This can help candidates gain the knowledge they need to succeed in their new role, but it’s important to note that a succession plan is not a one-time thing; it should be reviewed on an ongoing basis.
Choosing Family or Non-Family Heirs
When it comes to succession planning, family members are often the best choice for leadership positions. This is because they are familiar with the needs of the company and its customers, and they can provide valuable mentorship for their successors.
However, it’s important to remember that family members can change their minds as circumstances arise. For example, a family member might be very interested in becoming a business owner, but later on they might decide that it’s not the right career for them. This can be an untimely transition for the business and it’s important to make sure that a proper succession plan is in place.
The key to a successful succession plan is establishing it from the beginning and communicating it to those involved in the business, including the board of directors. This will help ensure that employees, lenders and investors understand what the company’s future looks like in case a leadership position becomes available.
