Business Succession Planning: 6 Steps for Small Business Owners
The Building Blocks You Need to Plan Your Company’s Future
Business succession planning is critical to the future of your company. Although the details and timeline may vary, every business owner must plan for a time when they will hand over the reins to a trusted successor. It can be challenging to get started, from both practical and psychological standpoints, but the three business succession planning steps below can help you start strong.
#1. Determine what your company is about.
Business succession planning won’t be truly valuable unless you have clarity on what your company is about. Who are you? It’s critical that anyone filling a leadership role within your business fully understands the company’s culture if you want the business to move forward successfully. Too often, those in key management positions focus too heavily on the nuts and bolts of succession planning and forget to incorporate the company identity into their plans, as well.
To be sure that you’re keeping the company as the focus of your succession planning, you must have a clear and compelling sense of why your company does what it does. A great way to determine who you are as a company is to get feedback from your employees. Interview a dozen different people and compare their answers about your company’s identity and purpose. If they are all markedly different – or worse, they can’t provide a clear answer – then you have problem to address. Define what you want the company identity to be and share these values and definitions with all of your employees as you move forward.
#2. Begin at the top.
For small businesses, it makes sense to start at the top with your succession planning – it will become a critical part of your estate plans. While you work to determine who you want to replace you, be sure that you’re communicating clearly about the importance of preparing for the future. Find a key employee and focus on talent development and communicating any institutional knowledge they’ll need in the future. In short, this step is about better preparing someone who you will want to replace you once you leave the company – or who could become a trusted advisor if you sell to someone external.
#3. Consider what your clients or customers need.
Prioritizing the needs of clients and customers is key when it comes to making any significant business decision. After all, they’re the lifeblood of your business. Without them, you wouldn’t be in a position to plan your company’s future at all. So, it’s important that your business succession planning includes strategic objectives that are centered around client services and customer care. When you focus on those you serve as the company evolves, they become an expansion on your company identity.
You’ll want to focus on teasing out and defining what an onboarding process looks like, how you want and expect your company to communicate with clients, and what critical roles are involved in those processes. You may also want to consider creating a handbook that discusses issues of culture, the company mission, and a code of ethics that you’d like everyone to follow when interacting with clients. It can be helpful when it comes time to facilitate the transition to new leadership.
#4. Use an organizational chart to identify key positions.
At this stage of business succession planning, you need more than thoughtful ideas in your head – it’s time to put pen to paper. Your written plans should include an organizational chart that identifies the key positions within your company. You’ll want to start at the top, which presumably is you. Then go down the list, including senior and middle management, assistants, admins, and interns, if you have any. Does your org chart make sense for the future you envision for the company as you transition out? If not, consider where you would add or remove positions. Leave vacant positions in the chart, too. Remember, this is a framework for the future that you’ll use to prepare the company for an eventual transition to new leadership.
#5. Take time to interview everyone.
Now that you have laid the framework for how you envision a succession to roll out from top to bottom, it’s time to interview your employees, evaluate their performances, and discuss their futures. This step will take time, but be sure that you speak with everyone, starting from the top and working your way down.
As you’re talking with employees, think about where you see them going in the near and long-term future. Will they be a good fit for a leadership role? If so, put them on a shortlist for you to think about when you go back to your organizational chart.
#6. Assign responsibilities and allocate your assets.
Your business is the embodiment of your hard work and passion, but it’s also a significant financial asset. Be sure to choose someone to act as an executor should something unexpected happen to you. Having these decisions written down and planned out ensures that your company will stay protected, and your wishes will be met, no matter what the future brings.
Concluding Thoughts on Business Succession Planning
Succession planning may not be the most exciting part of owning a business, but it’s incredibly important, and it’s best done sooner rather than later. If the recent pandemic taught us anything, it’s that we can never be too prepared for what’s to come. Now is the time to start focusing on what kind of legacy you want to leave behind and what you see for the future of your business once you’re gone.
At Paces Ferry Wealth Advisors, our team is dedicated to looking at the complete picture of your financial landscape and helping you build a financial plan that supports your short and long-term vision. If you’d like to begin a conversation with us about your small business or other assets, please contact us today.