Succession planning is rarely high on the priority list for business; however, the key to a successful succession plan is starting early.
Succession planning or business planning is the development of a strategy for the transfer of the ownership, management and financial responsibility of a business.
It is a process that outlines who will take over the business, when the current owners will leave and how this change in ownership will occur.
Succession planning will help to ensure that the business can continue to grow and develop when the current owner leaves. Despite its importance, succession planning still remains a large blind spot for many business owners.
The idea of a succession plan might sound simple. However, in reality, it can take years to implement and involves coordination across multiple areas of a business. Succession planning should not be seen as a single event but as a process that takes place over a time.
Businesses should have a good succession plan in place before transferring ownership of the business. This will help to ensure that the past owner can reap the maximum benefits of the transfer and not lose money due to the unforeseen taxes.
Many businesses owners can often require expert help to assist them in navigating the myriad of issues that arise with succession planning. These issues can vary from capital gains tax, estate planning, retirement planning and stamp duty.
An important decision to be made in the succession planning process is whom the successor will be.
The following are points to be considered when deciding on a successor for the business:
- choosing a successor entails choosing someone who is not only ready for the job but has the respect of key team members and the ability to guide the company into the future
- the successor should demonstrate a commitment to the same values that the business was built on. They should not just agree with the values but also demonstrate them in their work.
- a good successor should be able to establish a sense of continuity during the succession phase of the business. The successor will need to ensure that they establish and maintain key relationships with customers and employees during this time.
- it is not ideal to hire a successor to where the company is, but instead on where the company wants to be in the future. Future CEO’s of businesses will require a different set of knowledge, skills and perspective than the current leaders.
- businesses also need to consider the core competencies that are important in a CEO. The successor should have excellent leadership, communication and management qualities; however, some qualities will be specific to the business or industry. For example, some businesses may require the CEO to be an excellent salesperson.
Succession planning for a family business will be more complex than for a non-family business. Succession planning in a family business can often stir up interpersonal and emotional issues.
However, the business planning process is very similar-the key is in starting early. A potential successor should be introduced to the business as early as possible.
If family members show any interest within the business, they should be given every opportunity to be involved. This includes receiving the right training and education.
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