If you’re like most small business owners, you might never have thought about succession planning. You’re focused on growing your business and may have just assumed that you’d be there to run it, well, forever. However, if you're 10 years or less from retirement, it's not too early to start thinking about succession.
A succession planning consultant can give you more comprehensive advice, but here are five high-level considerations for business owners who want to get a jump-start on the succession planning process.
1. Make Succession Part of Your Business Plan
Start with the end in mind. Visualize what you expect your company will look like when you plan to retire, and consider the qualities and skills you expect your successor would need at that point to take the helm. As you get closer to retirement, continuously re-evaluate your expectations.
“Succession planning isn’t a one-shot deal,” cautions Bruce Meyer, attorney and CPA with Meyer & Associates. “Your succession plan should be evaluated every year along with the business strategy, and then updated as the business and people change.”
2. Build Your Succession Planning Dream Team
The good news for small business leaders who are hesitant to start the planning process is that they don’t have to go through it alone–and shouldn’t.
Form an advisory team comprising the people who understand the most important aspects of your business, such as your accountant, business attorney, HR director and business partners. This group should understand your wishes, help strategize the plan for succession, and be prepared to handle critical aspects of your business to ensure a smooth transition.
3. Visualize What Your Company Needs in a Successor
Successful business leaders may be inclined to look for a successor with his or her same qualities and personality, under the potentially false notion that the same type of person it took to start and grow a business will be the right one to continue to run the company in the future.
“In many cases a succession plan ends up being about about finding a clone of the CEO or leader,” says Dom Cingoranelli, Certified Management Consultant and co-founder of the Succession Institute.
Look to the future, not to the past. Think about the kind of leader who can take your business to the next level, not who got it to the current one (you). Consider the skills needed as well as the type of culture a successor would need to instill or nurture to continue to grow the business. Capture those requirements in a job description and update it as your business and succession plans evolve.
4. Identify Potential Successors
It’s never too early to begin to look for succession candidates. Always keep your eyes open for leaders within the company and in your personal and professional networks who possess what you want in a successor.
If you have a small, close-knit or family-owned business, you may be inclined to go with someone from within your family or an employee with whom you have a long-standing personal relationship–and in some cases that’s fine. But you have to be able to separate business decisions from personal attachments during your search.
“Sometimes the most challenging part for leaders is to remove their personal biases from the process,” says Kim Herrera, founder of Navitas Human Capital Consulting. “Leaders can feel overly invested in an employee they feel a personal connection to – they want people they’re invested in to be successful and take on the next big role, even when the reality may be that the individual is not the right fit.”
5. Start Grooming Leaders Internally
One of the more frequently overlooked elements of succession planning is people development. Even though your successor may not emerge from within, failing to develop your next tier of managers, leaders and supervisors within the organization could create a void behind you.
“Leaders need to think about what they’re doing within the company to develop more leaders,” says Bonni DiMatteo, president of Atlantic Consultants.
“You don’t want to be forced to make leaders in hindsight when there’s a crisis. The moment you become CEO is when you need to start grooming your next CEO.”
Even though “small companies don’t typically have the extra resources for company-wide training programs,” adds Cingoranelli, they can invest more time in training and developing their leaders.
Think about special projects you could assign to promising employees, mentorship programs you could start to give employees more one-on-one time with company leaders, or rotation programs to expose managers to different sides of the business.
A succession planning consultant will discuss these matters and more in greater detail, but giving them some thought ahead of time will expedite the planning process and help ensure you don’t get caught off-guard.
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