Do You Have A Succession Plan in Place?

Succession planning is the process of identifying and developing new leaders within a company or organization to take over key roles when current leaders retire or leave the company. It is an important aspect of long-term planning that helps ensure the smooth transition of leadership and the continuation of the company's success.

Because a small business owner often built their company from the ground up it can be hard for him or her to discuss succession. In fact, 58% of small business owners have no succession plan, according to a study of 200 privately held businesses by Wilmington Trust. Most of those with no plan (78%) blamed their lack of planning at least partially on enjoying "managing their company too much to start thinking about a future transition" while 42% said they were too busy to plan, and 44% felt that succession was "too far in the future" to need to establish a plan now. Source - USA Today

Yet,

Almost all employers (94%) said that having a succession plan positively impacts their employees’ engagement levels. Source - 30+ Succession Planning Statistics

There are several steps involved in succession planning:

• Identify key positions: The first step is to identify the critical roles within the company that will need to be filled in the future.
• Assess current talent: The next step is to assess the current talent within the organization to determine who has the potential to fill these key roles.
• Develop a plan: Based on the assessment of current talent, a plan should be developed to groom potential successors for leadership roles. This may include training, mentorship, and job rotation programs.
• Monitor and review the plan: The succession plan should be regularly reviewed and updated to ensure it remains relevant and effective.

Having a strong succession plan in place can help a company maintain its competitive edge, as it ensures that there is a pipeline of talent ready to take on leadership roles as needed.

Have you looked at the succession planning process or taken the steps to start?

Exit strategies are plans for how a business owner will eventually leave their business. In the context of succession planning, an exit strategy is a plan for transferring ownership and leadership of the business to another person or group.

Here are some common exit strategies that may be considered as part of succession planning:

Option 1. Selling the business: This could involve selling the business to a third party, such as another company or an individual investor.

Option 2. Passing the business on to family members: The business owner may choose to pass the business on to a family member or group of family members, either through a sale or by transferring ownership through a will or other legal document.

Option 3. Promote from within: The business owner recruits a successor from within the company and then gradually transitions ownership and leadership to that person while still maintaining a passive equity stake in the business. This can allow the owner to continue to receive income from the business during retirement while also having the satisfaction of knowing that the business is in capable hands.

Option 4. Going public: For larger businesses, going public through an initial public offering (IPO) can be a way to transfer ownership and leadership to a broader group of stakeholders, such as shareholders.

Position the company before an exit, transition and/or as part of the succession plan

Positioning a business before an exit is important because it can significantly impact the value of the business and the options available for exiting. Here are a few reasons why positioning is important:

• Maximizing value: Proper positioning can help to increase the value of the business, which can make it more attractive to potential buyers or investors. For example, implementing cost-saving measures, expanding the customer base, or improving efficiency can all increase the value of the business.
• Attracting potential buyers: Positioning the business in a way that highlights its strengths and potential for growth can help to attract potential buyers or investors. This might involve developing a clear value proposition, demonstrating a track record of financial performance, or highlighting the skills and expertise of the team.
• Evaluating exit options: Positioning the business in a certain way can also help to determine which exit options are the most viable.

For example, if the business has strong financial performance and a solid customer base, it may be more likely to attract buyers or investors.

On the other hand, if the business is struggling or has limited growth potential, other options such as closing the business or transferring ownership to family members may be more appropriate.

If you need help positioning, selling or even with succession planning feel free to reach out to see how much your business is worth.

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