It seems strange but planning for your succession – how you’ll leave your business – is a critical part of growing and running your business right now.
It’s easy to think of succession planning as only for people nearing retirement, but the reality is that the sooner you start, the better. That’s because it isn’t just important for ensuring the future of your business after you’ve stepped back, it can also help you clarify what you really want from the future. With this clear, you can plan the steps to get you there – whether those goals are business, personal or around family.
It means that when it is time to sell, merge, or otherwise hand over the reins, your exit strategy will reflect the sweat equity and capital you’ve invested over the years.
Most people – even those who may be considering stepping out in a matter of years – put succession planning on the back burner, missing out on those golden insights and laser focus. The good news? That means that your planning can and will give your business a significant edge.
Leaping the emotional hurdles
Don’t be daunted by succession planning – it may seem complicated, and even a little depressing for some. You’re planning for someone to take over after you’re gone, which means you have to look reality in the face: you are replaceable. And while in business that’s objectively a good thing, it can still feel uncomfortable thinking about someone taking your place in the company you’ve worked so hard to build.
On the upside, you may find that by defining your exit strategy, you also resolve some of those niggling issues that could have seemed entirely unrelated. These may be that you:
Believe no one else can do your job, so you feel overwhelming pressure to stay at the helm, even when your health, family or other commitments need you to take a break
Wonder whether it will be all worth it in the end – did you just create your own ‘job’, rather than a business that will eventually return your investment and more?
Feel worried by the expectations your family has for your business, and whether you can meet them
Have big dreams or other goals, and wonder if you’ll even get the opportunity to pursue them
Have the sinking feeling that you won’t have enough saved to enjoy the kind of retirement lifestyle you’ve always dreamed of
Hope for the best, prepare for the worst
Even if you’ve only just started your business, succession planning is critical – not just so that you reap the benefits of those sharply defined goals now, and the maximum value from your business later. You’re also establishing a ‘go-plan’ in case the worst happens. If you’re hit by a bus today, what happens to your business? If you get ill, and can’t work for six months, does that mean you should lose all that you’ve worked so hard for? Well-considered insurance can help, but it can’t take the place of a good plan for minimising stress and damage to your reputation, protecting your personal and professional relationships, and ensuring the value of your business holds firm. These are things succession planning can provide.
How to plan for your succession
Unsurprisingly, succession planning requires a lot of detail – some you may not even think about.
The steps to creating a succession planning are
Decide what you want out of your business
Clarify your succession options
Identify the key people involved
Define the timeline and key milestones
Clarify all personal, business, financial, legal, and taxation considerations
Identify the actions and strategies you need to take to turn your vision into reality
A planning session with a professional can be invaluable in helping to work through each of the steps. Together, you’ll create a concise plan to guide you towards this vision. Our clients find our sessions offer them:
Time to take stock and define goals
Strategic discussion around ‘what if’ scenarios
The chance to align the vision for owners, team members, and successors
A clear picture of challenges and opportunities in the business
An impartial sounding-board to aid the decision making process
A clear succession process, with defined tasks and actions to maximise your outcome
The chance to identify and prioritise key goals and milestones
An increased ability to make effective strategic decisions
Tools to communicate the succession plan with family and other key stakeholders
Accountability for achieving the goals
Access to our collective wisdom, systems, products and services
Start with at least a three-year lead time
While it’s true that everyone in business should have an exit strategy, if you’re planning to step back from your business, or sell it in the next three years, you need to start now. This is the minimum amount of time you will need to put plans in place. Any less and you risk not realising the true value from your business. The longer you have to plan, the more time you have to groom your business for the perfect exit.
For help developing your succession plan, call us now on 09 296 9122 to book your session with Thrive CA.