No entrepreneur wants to feel mortal. That's why so few businesses have a succession plan in place before the leader leaves. The effect is very costly though. According to the Small Business Administration (SBA), only 30% of family owned businesses succeed into the next generation. A good succession plan:
- Serves as a blueprint for hiring or training successors.
- Reassures the marketplace that the company will continue to function.
- Defines the future of the company.
- Can reduce real estate taxes when transferring a family business.
- Provides a flow of well-trained managers armed with definable goals.
Evaluate your responsibilitiesCreate a job description by listing all your responsibilities. Experts advise that you make a list of requests that suppliers, clients and employees ask of you. Then break it down further by listing the skills, attitudes and knowledge that you use to meet these demands. This is your blueprint that you can use to evaluate staff members. Also, list the number of additional staff positions that would need to be filled in your absence.
Make the planThe first step is facing the ego-busting reality that, one day, you'll be replaced. Be committed to creating a transition plan so that you can communicate your needs to others. Discuss these ideas with a mate and company management clearly and often.
Choose potential successorsConsider more than one successor, especially ones who can be easily promoted within six months time. And then spend time developing them: allotting more decision power and letting go of more control of the company. Fold these responsibilities into twice-yearly job reviews that include sharpening successor skills or transferring information.
Lay the financial and legal groundworkConsider early on the terms and funding for a buyout.
- Consider forging a succession plan as soon as you've moved beyond start-up stage.
- Considering setting up an advisory board to help ensure a smooth transition from one leader to the next.
- Create a simple transition plan that doesn't feel confusing to executives.
- Use good advisors such as accountants and lawyers along the way.
- Trim anything in your business that doesn't relate to your succession plan.
- Think of succession planning as a seamless process, not a single event.