How To Create a Business Succession Plan
There is an unbelievable number of companies across a wide array of industries, which may lead you to believe that the creation of a succession plan must be a unique and one-off process. For instance, family businesses in particular carry distinctive cultures and reflect idiosyncratic histories in ways that might be challenging for outsiders to relate to, let alone understand.
But despite all the differences that set companies apart from one another, the process of compiling a business succession plan is remarkably uniform, no matter the specifics of your business. Although a good plan must be customized to each business and its needs, there are many standard principles that apply to all businesses across the board.
The value of having a business succession plan in place is universally recognized by all company owners. Plans such as these serve the purpose of facilitating leadership continuity and preparing a framework, especially since changes can occur rather quickly. Firms are advised to plan anywhere from three to five years ahead of any anticipated changes in ownership. It is equally important that they review their plans regularly.
The meat of the plan
When putting together a business succession plan, there are certain general considerations that should be thought about before moving into the more specific aspects of the plan. For instance, successful business owners are attuned to fluid environments, and they understand that key people will eventually retire, meaning new strategies and directions will subsequently require various levels of competency.
The succession plan must establish a collective vision and an attainable set of goals. With this in mind, remember that the plan is supposed to be where roles, skills and experience levels are not only defined but also aligned, while also addressing gaps that need to be filled.
It's important to think about all possibilities and be honest with yourself during this process. For instance, should a family continue to own and manage the firm, or is it time to enlist the guidance of professionals outside the family tree? If family members are retiring soon, what are their objectives and cash flow requirements? What are the personal and career aspirations of the next generation of employees?
These are all inquiries that point to the foundation of the business, and once they have been addressed, it's time for the authors of the business succession plan to turn to the more difficult questions. Some important plan components include the following:
Ready to implement
Once all the aforementioned measures have been taken and the processes are officially documented, the moment has come to roll out concrete action plans. Continue to monitor and calibrate the business succession plan along the way.
As the last stages fall into place, you may be ready to circulate the plan amongst fellow employees in an effort to collect critical feedback. The instrument should be dynamic, meaning it must be constructed to adapt and adjust with the times. Open communication between family members, stakeholders and employees will lead to a far more comprehensive blueprint.
If the timing of the transfer can take place during the owner's lifetime, it may benefit all parties to maintain ongoing consultations. It might also lessen any prospects for a discounted sale. Linking the succession plan to an overall strategic plan will provide your business with a clear map for continuity into the future.
Many moving parts play a collective role in the production of a consummate business succession plan. Tap into the expertise of your attorneys, accountants and internal management team to achieve concerted results that set up your business for unwavering success moving forward.
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