Does Your Business Have a Succession Plan?
Does your business have a succession plan?
Succession planning: It's no business's favorite task, but it's a critical one to undertake. Yet the common refrain from small-business owners is that running day-to-day operations is busy enough; there's no extra time to devote to succession planning. Besides, what's the rush? Owners may feel succession is too far down the line — or not an option at all — that there's no need to engage in such planning.
However, the simple truth is that without a succession plan, your business may be gone the next day should events transpire. Succession planning is not having one foot out the door, as it's commonly looked at. Rather, it is a mission-critical responsibility that owners and leaders have to preserve business continuity .
With that singular mandate in mind, it's important to direct some time and resources toward planning. Though striking a balance may be difficult, it will be invaluable.
The state of succession planning
Truth is, if you don't have a solid plan or haven't thought about making one, you're not alone. A 2017 survey from Wilmington Trust found 58% of business owners have not created a specific plan :
- 27% had a broad outline.
- 20% don't have a current plan despite thinking about one.
- 10% said a transition hadn't cross their minds at all.
This isn't a problem for the largest enterprises. Businesses that responded to the survey may look a lot like yours, too. Of them, 66% were family-owned, 48% had fewer than 50 employees and 73% were in business for more than 20 years. For small and medium-sized business, succession planning can be a particularly hard bridge to cross. These barriers exist for many reasons. Some of the top challenges identified by those without a plan included:
- Current enjoyment with running the company.
- Transition timeline was too far out.
- Owners are too busy.
- Family is in line to retain future ownership.
- No clear successor has been identified.
- Owners don't know where to begin.
Starting your succession plan
Life moves pretty fast, and so does business. Personal or market turmoil can change the game in an instant. When these developments occur, it's crucial the organization has stability. This is important not only for the business, but all those who depend on it: employees, customers, shareholders, and sometimes family.
Succession planning is that rock on which you can buttress your business. And it's not as difficult to undertake as it's made to be. Here are some tips to jumpstart your thinking:
1. Gather necessary stakeholders
Succession planning is not a one-person job. Sometimes it takes an entire, dedicated task force. When the time comes to start planning, gather your team of leaders. Try to involve stakeholders from all levels, or at least communicate with them about succession planning goals. For instance, board members should be included in planning, but employees may just be happy to be kept updated.
2. Evaluate your options
There are many ways to exit a business. It's imperative that you assess your options before tying yourself to one strategy, even if you're a family-owned operation with intentions to keep it in house. Transitions to research include selling to minority owners, employees or outside firms; handing off ownership reins to family; and taking private equity but retaining some ownership.
3. Establish an emergency plan
Should a situation befall the current owner, the business will need leadership from somewhere. A contingency plan for emergencies should be one aspect of the overall succession plan that you aspire to put together. Having such plans in place — just in case — is ideal for preserving continuity.
4. Guide your successor
When you have a successor identified, be sure to gradually include him or her in more important and diverse decision-making. Give them corporate assignments that fall outside their comfort zone, or let them shadow you. Such experience will be key.
Financials are another essential component to succession planning. There are tax and wealth management considerations during such transitions, so reach out to your local Vectra Bank rep today if you want to learn more or need help.