Succession planning is an important part of business strategy. It helps you make fundamental decisions about identifying and developing new leaders, maximizing company value, tax strategy, and ensuring that your business and its clients are protected. Here are the appropriate steps of succession planning to utilize when developing your business strategy.
Analysis of Future Goals and Objectives
It is crucial to develop goals and a vision for your business, such as an exit strategy that outlines post-business ownership goals and future business plans. It’s also crucial to identify the job roles and internal structures that will be critical in achieving these strategies. This will include identifying the right skill sets, competencies, and experience required for a successor.
Decision Making to Select a Successor
Part of the decision-making process will involve role analysis and people analysis. This may involve performance reviews and psychometric testing of current employees, partners, family members deemed fit, or head hunting outside the company for relevant suitors.
This step generally involves the HR and operations departments. It will also be important to have a conflict resolution process in place to ensure that any conflicts that arise can be resolved.
Training a Successor
Once you have identified the core skills required through the above processes, you can now focus on the development and training of the new owner. You will want to ensure there is a structured development program in place that can help identify any gaps in their skills and competencies, and help easily transition them into the role. This can involve shadowing, mentoring, and available learning activities or courses.
It is essential to the operations to create an estate plan to outline any estate and inheritance issues that may arise. This will include tax implications and any potential probate delays.
Creating a Contingency Plan
A contingency plan should be in place, or a backup succession plan that will go into effect if the original plan fails in case of illness, accidents, and death. This should include the financial resources required that will help protect your business and clients from a failed succession plan.
Corporate Structure and Transfer Methods Available
It will be necessary to determine all options in regards to the corporate structure going forward. This will include evaluation of your current status – whether sole proprietor, partner, or owner – and what options are available to you. Here you will also outline the possibilities available for whether you will transfer or sell the business to your chosen successor.
Financial Valuation and Market Conditions
Research will be required to obtain the fair market value of your business and the current market conditions. This will include looking at comparable properties and financial valuations.
Exit Strategy and Timeline
Creating an exit strategy and timeline will be essential to determine the steps on how and when to exit your business, while providing the most financial gain.
Implementation and Follow-Up
Once a succession plan is in place, an implementation and follow-up strategy should be conducted to ensure regular review and updating is conducted.
Having a succession plan is an opportunity to identify key risks and plan ahead for your business. Use these steps to ensure that your business strategy is safe and sound.