Important Steps in Developing a Business Succession Plan

Most business owners are focused on building the company and maintaining its growth and profitability. These tasks can take up most of your time and energy, and include activities such as hiring and retaining quality staff, developing products/services that will outpace the competition, and improving technology, workflow and taking other steps to make the operation run more efficiently. Unfortunately, these important tasks often leave little time to develop an effective succession plan for the business. Business Valuation

As we enter a New Year, this may be a good time to contemplate the future of your business. Here are five important steps to take toward implementing a strong business succession plan:

Establish Future Company Goals and Objectives: The first step in developing a succession plan for the business is to decide in advance where you want the business to be in five, 10 and even 20 years. What products and services do you plan to offer? What local markets do you want to compete in? How large do you want your organization to be? These and similar questions should be addressed by all key members of your organization so everyone is on the same page.

Implement a Solid Strategy to Achieve your Goals: After everyone is in agreement about the objectives of the organization, it is important to put together a viable strategy to move you toward your goals. Assign key members of the organization the responsibility to tackle various aspects of the growth strategy and hold regular meetings to ensure you are continually on target toward becoming the company you and your partners (if you have any) envision.

Explore Ways to Strengthen your Systems and Processes: For an organization to be successful long-term, it must have strong and effective systems and processes in place that can be continued long after you and the other owners exit the company. This is the main ingredient for the success of franchises such as McDonald’s; they have tested and proven systems in place that are replicable and scalable. This allows the organization to rely less on key individuals, because the system itself can continue after the founders are gone.

Take Steps to Minimize Risk: There are times when the unexpected illness or death of key individuals can have a devastating impact on an organization. If this is the case with your company, then it is important to properly plan for these scenarios. You should have strong buy/sell agreements that determine who is allowed to buy into your business as well as life insurance policies (naming the company as beneficiary) in the event of the loss of a key member.

Plan your Exit Strategy: Once you have the business on the right track with strong systems in place and a risk minimization plan, it is time to think about when you want to leave the company and who you want to take your place. Establish a timeline for implementation of your succession plan and decide how you want to transition out of the company.

What if I want to sell my business to an outside party?

There are many instances when there is no suitable successor within the family or the organization. In such cases, it may make sense to put your business on the market and sell it to an outside party. This process may seem scary if undertaken alone. If you are thinking of going this route, it is best to speak with a business broker about the process and what it will involve. Even if you ultimately choose not to retain the services of a business intermediary, a couple hours of consultation can go a long way in positioning your business for a successful sale.

Be the first to get notified about new listings