There has been a lot of coverage regarding the fact that most businesses are operating without a succession plan in place. This is a risky approach. And, if you are in charge of a firm that does not have a succession plan, you need to act sooner rather than later. One of the reasons why so many people overlook succession planning is quite simply because they do not know where to begin. Keeping that in mind, below we are going to take a look at some key questions you should consider to get started.
What type of deal structure are you comfortable with?
You need to determine what type of succession is going to work the best for your company. When considering this, one of the most pivotal factors to bear in mind is client retention. In most cases, training one of your current members of staff with a bachelor of science in organizational leadership or such like is the best approach to go for, as clients are more familiar with those who already work at your business. This makes the transition seamless and more natural. However, this is not the approach for everyone, and you do have other options at your disposal, such as ‘sell and stay’, i.e. you sell the firm to someone else, and you stick around for a couple of years to help with the transition.
What are your objectives?
You cannot put a business succession plan into place without having a clear understanding of what you are hoping to achieve when you retire. You need to have a picture of what your ideal exit looks like. Do you want to work part time for a while? Or, do you want to fully retire? You need to decipher what it is you want to achieve from your retirement in order to create a succession plan.
When do you see yourself retiring?
Of course, a succession plan serves to assist when there are unexpected disruptions to a firm. Nonetheless, they are also there for planned exits too, and when it comes to this, you need to incorporate a realistic sense of timing. A lot of advisors mistakenly believe that putting a successful succession plan into place is something that is only going to take a couple of months at the most. This could not be further than the truth. In fact, implementing such a plan can often take years, so you don’t have any time to waste.
How will you implement the succession plan?
Last but not least, you need to consider the implementation phase. Issues can occur between the seller and yourself if your expectations are not in line. You may feel like you are sidelined too quickly, for example. To avoid such situations, it is important to put into writing what the transition should look like – the first six months let’s say. This will outline the responsibilities and roles of both parties. Be realistic; don’t only consider yourself, but look at it from the buyer’s perspective too.