Business Succession Planning Timeline

One of the reasons for this is that the value of a business is directly impacted by risk, both existing operational risk and potential risk associated with disruption to the business through a change in ownership and/or management. A well-crafted succession strategy identifies and mitigates these risks.

It is in your interests to do this regardless of whether you decide to sell the business outright, or retain equity and continue to receive a share of the profits after withdrawing from management.

Preparation and considerations before developing your plan

These should include: 

• Having a clear vision for the business - without this you won't know what kind of leaders to identify and develop.
  
  
• Strengthening the business model and focus on sustainable profit.
  
  
• Making yourself redundant - delegate and allow others to make decisions.
  
  
• Having your business valued and draw a line in the sand - a professional valuation will provide you with a solid insight into how much, or little, needs to be done to bring the business to the price you have set for it.
  
  
• Understanding your industry dynamics and ensure the business is sustainable against these volatilities.
  
  
• Considering who needs to be involved in the development of your succession plan.
  
  
• Identifying the skills currently held by people in key positions.
  
  
• Identifying successors - people who are ready, willing and able to take over.
  
  
• Enlisting professional help where needed.
  
  
• Linking your business strategy, both current and future plans, to talent requirements.
  
  
• Involving your top executives and gain their commitment to growing talent for the business.
  
  
• Identifying the talent in your business and invest in those people.
  
  
• Planning for continuity in the transition period and for when you exit the business.
  
  
• Having a contingency plan in case the unforeseen happens and your intended successor declines the role or is unexpectedly unavailable.
  
  

Letting go of the steering wheel

Develop a business transfer plan. In it, develop a timeline for starting the transfer of ownership and management to others. Decide when your successor will:

1. Start assuming some of your responsibilities.
   
   
2. Take on a major portion of the responsibilities.
   
   
3. Take on the responsibility for day-to-day operations.
   
   
4. Be formally introduced to the rest of the business as ‘in charge'.
   
   

Importantly you need to ‘let go', not just when you exit the business, but from the word go. Choose your people wisely. Have the confidence to delegate and engage them. Reward them for their performance and their behaviours.

The basics of a good succession plan

There is no ‘one-size-fits all' template for succession planning. However the following considerations form the backbone of an effective, well thought through plan. It should identify:  

• The owner's proposed time-horizon for exit.
  
  
• How issues such as the estate, tax, financial and personal planning by the owner for their life after business will be dealt with.
  
  
• The potential to increase the economic value of the business.
  
  
• Any potential barriers to a successful outcome.
  
  
• The influence of ‘bit players and smiling assassins'.
  
  
• The transactional options: sale; management buy out (MBO); etc.
  
  
• The talent pool within the business.
  
  
• The financing options for a transaction: does the business have a value which is appealing to the private equity market? Does it make sense to have a share plan? Is vendor finance an option?

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