No one wants to think about the “what ifs” in life. But most “what ifs” eventually become real-life issues. So it’s important to have a will, to buy insurance, or to plan for retirement. And if you own or manage a business, it’s important to have a business succession plan.
After all, owners eventually retire. Key management members may move on to new opportunities. And as sad as it may be, a leader of a business may die unexpectedly.
In these and similar scenarios the businesses that survive these events are those that have put a great deal of thought into a business succession plan. Those that have not may, or may not survive these types of transitions.
The more complete your business’ succession plan, the better. But even the most basic plan can put a business light years ahead. Taking or at least giving thought to the following five basic steps regarding business succession planning may well put your business in a more secure position when it comes time for a transition.
Gather owners and key members of management. Each member of management brings important perspectives to the running of the business and to the development of a succession plan. An owner brings one perspective while a chief financial officer brings another, more focused and specialized point of view. Operations leaders and sales people also each bring different perspectives to the table. The point is, each member of a business’ leadership team can and should make important contributions to a succession plan.
Determine goals and objectives. A business succession plan – just like the business itself – is unlikely to be successful if it doesn’t have clear, measurable and achievable objectives. These goals shouldn’t address every last, miniscule detail. Rather, these should be overarching objectives that bring together each area of the business.
Identify key personnel needs in the near- and mid-term. Development of a business succession plan affords each member of leadership an excellent opportunity to speak frankly about their personal plans. Would the CFO like to retire in five to ten years? If so, has she or he identified a possible successor who could be groomed to eventually step into the role? Or does a future successor need to be recruited and hired. Remember, business succession planning doesn’t apply only to owners and CEOs; it can also help with today’s recruiting efforts.
This is also the time to discuss who are today’s successors. No business wants to be caught without seconds-in-command for every key position should something unfortunate happen.
Think about the life-span of the succession plan. Changing market conditions, rapidly evolving IT needs/developments, and unforeseeable world events such as global pandemics can require even the best business succession plan to be updated. Discussing an ongoing review process during the development of the succession plan means the new plan won’t go stale before it’s needed.
Write down the succession plan and distribute it to your business’ key leaders. The best business succession plan is worthless if it’s just a discussion, never written down and distributed to company leaders. Keep in mind a succession plan in many respects is in some circumstances similar to a business continuity plan in that in the event of a sudden loss or departure of a key company or department leader, options have already been thoughtfully weighed and put into a readily available document.
A Final Thought. Business succession planning is a key to the long-term survival – and success of most businesses. It requires careful consideration and thought. The fact that for most businesses succession planning is not something done with any regularity means it’s important to at least consider bringing the knowledge of an experienced law firm to bear on this key task. The lawyers of Mickes O’Toole’s Business and Corporate practice have a wealth of experience in helping businesses solve complex business problems, including succession planning. Contact us today to learn more about our services and how we can help your business.