Choosing a successor for your business isn’t easy. There are many internal elements to consider and outside factors to weigh, while simultaneously dealing with the sensitivity of putting your business in someone else’s hands. While developing the right succession plan can be long and arduous, it will be worth the effort when you know that your company is best prepared for future changes. Here are 5 tips that will lay a solid foundation for your successor search, so that you can build a stable future for your business.
Understand your goals
Approximately 30% of businesses make it from first-generation ownership to a second-generation successor. The best transitions happen when there is a process with a timeline and a plan attached to reach succession goals. No matter if your company is family-owned or not, what are the goals of your succession strategy? This will help you better decide who would be best suited to reach your desired outcomes. What are you trying to accomplish and what do you want the business to achieve in the future?
Look within your walls
When it comes time to step down, the person who takes your place might already be a part of your company. While there are surely excellent candidates in your community and beyond, a current employee could have similar qualifications, with an extra bonus: he/she already has experience with your company. You will be able to speak to many referrals for the candidate within your company, and the candidate will already have extensive knowledge of your company, its successes, its internal struggles, and will have more than likely developed a rapport with your fellow executives over the years.
You have been with your company for years (maybe even created it), which means you have a great deal of care for its success. When you are searching for your successor, it is natural to choose someone who mimics your characteristics and has a similar background and skill set. While there is no doubt that you have done great things for the company, it’s essential to explore individuals who have a different point of view and a unique way of doing things that could be extremely beneficial for the future of your business. Don’t hold your successor to clone-like restrictions of yourself, as you will miss out on top talent.
Reflect the future
It’s easier to consider who could effectively fix today’s problems and who is capable of taking over the business if needed, today. But it’s essential to remember that succession planning is not about today; it’s about the future. When you consider who in the family, in the company, or outside of your circle could fill your shoes, ensure that their values, work ethic, vision, and experience reflect the future of your business. Do you want the company to be the same as it is today or do you desire it to change? What type of person do you need to make those changes?
Consult with the right people
This decision should not weigh on one individual’s shoulders. A succession plan should be carefully collaborative, involving all of the right people at the right time. Include your family (if family-owned), trusted advisor, fellow execs, accountants, and legal team to ensure that the selected successor is right for the job on all levels. There is a delicate balance between getting too many people involved in the decision making process and not asking for enough advice. Find the balance that works for you so that you make the smartest decision for your company.
While there are many specific questions you should be asking and conversations that you should be having, a general framework will help get you started. Whether you founded the company, worked your way up the ranks on your own, or inherited your spot through family, a succession plan is an essential piece of the puzzle that not only protects your business but prepares it for the future. It’s not easy to hire someone to run the company that you’ve considered “yours” for the longest time, but it’s better to prepare for it, so that it’s done exactly how you imagined, rather than it being left up in the air at the risk of unpreparedness. Do it right so that your succession is successful.
Are you looking for legal help regarding a succession plan? Contact Hartmann Law at (816) 599-6638. Kristi Hartmann offers business, real estate, and estate planning legal and mediation services.