Busy running your business every single day, you probably have very little time to think about the future. Coming up with a scenario for every plausible “what if” situation is time-consuming and impractical. Yet, do you need to do a little bit of preliminary thinking about the future of your company? How can this type of strategising help you?
Succession planning is vitally important, regardless of your ideas for the future of the business. Whether you want to sell the company or get one of your children involved in the managerial process, you need to have a sound and easy to execute strategy.
The following Coast to Coast business guide will help you get acquainted with the basics and the rules of succession planning. Once you understand its specifics and logic, you will find out that it is much more practical and less time consuming than you believed it to be.
Business Succession Planning Explained
For a start, we should take a look at the specifics and the definition of succession planning. What exactly is it?
Succession planning refers to the creation of a strategy for your company’s independence, sustainability and profitability in the future. In simple words, you spend some time thinking about what the best way to exit your company will be.
Through succession planning, you will determine who is going to take over, whether the company will be sold and what kind of activities will it continue performing in the future.
Succession planning has two main subdivisions that depend on the exit strategy you choose. Retention planning will be needed if you decide to keep the business family-run. If you are interested in transferring the company to a family member, you will have to get this person involved early enough and you will also have to deal with all of the respective legal issues.
The second option is called buy-sell planning. This is the type of strategy you will need if you decide to sell business privately. This is the strategy that the Coast to Coast business for sale team specialises in and can help you with the marketing of. Buy-sell planning is slightly more complex because it involves developing the company, making the right pricing decisions and looking for suitable investors.
Why Worry about the Future of Your Company?
The day in which you are going to exit your business seems so far away that you are probably thinking whether succession planning is necessary at all.
Doing a bit of planning in advance will take the guesswork away. You will have a really clear idea about the future of your business and your exit strategy. This kind of clarity will help your business and it will also allow you to move forward with your life without worrying.
If you plan to sell business privately, succession planning will help you make the most of the opportunity. You will get your company ready for the sale in advance, which will result in a higher price and better offers from the potential investors.
Succession planning requires at least a couple of years to execute properly. The earlier you get started, the bigger the benefits are going to be.
A Guide to the Creation of the Best Succession Plan
What does it take to do proper succession planning? Whether you plan to sell business privately or to get a family member involved, you will need to follow a series of basic and vitally important steps.
- Establish your goals: what are you hoping to achieve with your succession plan? Defining your goals and objectives very clearly will give you better targeting opportunities. Are you interested in continuing family involvement in the company’s leadership? Do you want to develop a solid product portfolio before you exit? Be very specific because the goals and objectives will affect all other aspects of succession planning.
- Evaluate your business: at what stage of development is your company right now? How much more will you need to work in order to get to your goals? What is the company’s current value? Evaluating the business right now will give you a good idea about what you are starting with and how far you will have to go.
- Consider growth options: use the time before exiting to make the company stable and to expand its scope of activities or market penetration. Whether you choose a family successor or you decide to sell business privately, corporate expansion will be essential. Take enough time to think about the possibilities and to execute the most profitable or sustainable ones.
- Document the succession plan and establish the right kind of decision-making processes: put down the succession plan in writing so that everyone in the managerial team is aware of your preferences. There should be sufficient information about succession and the decision-making process after you are gone. Both family successors and new investors will benefit from the availability of such a document.
- Work on a transition plan: the final aspect of succession planning involves the creation of a transition plan. Establish a timeline for the implementation of the succession plan and think about the practices that will make the transition smoother. The exit of an owner or a vital manager can shake the company, which is why the transition plan can be life saving for your business.
Coming up with the succession plan may seem like a fairly simple task but its proper execution will be more challenging. Start working on it early enough, especially if you have big plans for the future of the business that you founded. It will be impossible to plan for every possible scenario but knowing what you are looking for is going to result in focused efforts and higher productivity.