The general lifecycle of a business typically follows a few different stages. These stages include start-up, development and establishment, and finally maturity. As a business owner, once you’ve reached the maturity stage of your business, you are likely considering what the future of your company holds.
What will happen to your company when you retire? While planning to exit your business can be an emotional decision, it is also essential to the greater success of your business. What we have found, is that most business owners prefer to procrastinate on putting together a proper exit plan, which could end up being the reason your company does not succeed beyond your leadership.
Ideally, business owners start preparing their succession plan three to five years prior to their exit. This plan is in place to protect the company when the executive team is no longer available to serve their duties. When succession planning is rushed, hiring mistakes are more likely to occur, and the future of your business could be at stake.
In an effort to help you along this planning journey, here are a few tips to guide a successful succession planning process.
Assess Core Competencies in Alignment with your Business’ Strategy
First, take a look at your organization and work to identify the significant business challenges you may face in the next one to five years. Then, you can connect the positions that will lead to business continuity in the long run. In doing this, you’ll likely find the core competencies, skills, and knowledge that are critical to the success of your business.
Evaluate High Potential Employees
Once you have identified the positions and skills needed to continue your business, you can begin to consider who may take your place and the place of other leadership positions within your organization.
During this process, it’s important to account for your overall business strategy. Is the person you’re considering the right person to execute that strategy? What skills does this person need to drive this strategy forward?
Clear Communication with Stakeholders
As you go through the process of finding your successor, it’s important to include other key stakeholders within the business. Involving senior leadership and other members of the executive team to weigh in on whom they think is most qualified to take on this new role is essential to gaining their buy-in when the transition occurs.
Training Your Successor
Now, it’s time to communicate with your successor. Training your successor to take your place is of the most important steps in this process. Make sure they have enough time working with you to understand how the business operates, and how to grow the business from a position of strength.
Be sure to spend time with them during this entire process. Help them make decisions with your guidance, show them alternatives that they might not think of due to experience, and help them understand the risks associated with their decisions.
To go a step further, before you decide to leave your business, craft a strategic plan with one another. This helps ensure your successor is prepared and bought into creating a successful future for your business.
Lastly, there are a few potential obstacles that you may run into during this process. These obstacles typically include timing, resistance to change, and lack of company support.
The entire succession planning process can be a time-consuming one. The time it takes to assess, evaluate, and develop your successor is not something to lose sight of. This is why it is typically recommended to start your succession planning at least three to five years in advance.
Not taking the time to develop this process can be detrimental to your company’s success. As we mentioned above, it usually leads to hiring mistakes, but it also has a large impact on your organization as a whole. If your successor is unprepared to take on this new role, your business will not be able to reach its full potential.
Resistance to Change
One of the reasons it is recommended to take three to five years to a succession plan is the impact it has on your people. Many people are resistant to change, especially as it relates to their careers.
Preparing your successor over time, allows the rest of your organization to familiarize themselves with the new leadership style they will be experiencing. Which leads to greater buy-in, and an easier transition overall.
Lack of Support
Similar to the point above, during any business transition, you will likely have naysayers, skeptics, and resistance. Most of these issues stem from the emotions that arise when people are concerned that their job is at risk. A simple way to mitigate this issue is to communicate as frequently and transparently as possible.
Aside from succession planning, there are other factors that go into exiting your business. For you, that may mean selling your business. How can you begin to prepare to sell your business a few years down the line? Take a look at one of our recent articles to get you started.