Smooth Transitions: Mastering Succession Planning for Your Business
In its simplest form, succession planning is a strategy for replacing or passing on leadership within a business. When done well, business owners proactively identify and develop new and potential leaders to move into leadership roles that may become vacant.
Whether you are a business owner or a leader looking to plan for retirement or sell your business down the road, it’s important to begin succession planning as early as possible. Below, we’ll cover a few common questions to tackle as you consider succession planning.
How far in advance should I start succession planning?
It is never too early to begin thinking about succession planning. It takes time to identify the right person or team to replace you, so it’s helpful to start now rather than wait until you’re under pressure. If it’s a complex business, give yourself plenty of time—planning and training could take many years. It’s also important to note that succession plans can evolve and grow as your business grows. Be sure to review the plan annually to keep it current and relevant.
What key things should I consider when developing a succession plan?
One of the first things to consider is how you plan to exit the company—do you plan to sell it, or will someone else take it over? Once you know the end goal, you can start building bench strength at all organizational levels. When you transition away from the business, other changes could occur, or team members could leave the organization. Thinking through these possibilities and planning for them will make the transition smoother.
What are some common challenges I could face when it comes to succession planning?
It may be obvious, but the most significant issue is not having a plan. Don’t wait for an emergency to start the process—proactivity will save you from headaches. Another common problem arises when owners lack trust in their team and are worried about choosing the right or wrong successor. Building bench strength and investing in a core leadership team can help ease this pressure.
What partners can help with succession planning?
There’s no need to go through the planning process alone! Don’t wait to have preliminary discussions with your trusted advisors, including your banker, accountant and attorney. Additionally, some accountants specialize in succession planning and company valuation.
How can my banking partner help with succession planning?
Commercial bankers will typically ask small business owners about their professional and personal short-term and long-term goals. By gaining a deep understanding of these goals, bankers can help inform and identify what actions can be taken to begin strategic succession planning based on their specific situation. Your trusted banking partner can be a great resource for providing personalized guidance and connecting you with other professionals. Restructuring your finances to accommodate your future plans or helping a partner or team member finance a buyout are also ways your banker can add value. Learn how our bankers helped a leadership team transition into ownership roles in this video.
Succession planning is essential for all businesses, whether big or small. It’s important to start reaching out to your trusted banking partner and advisors as early as possible to help you formulate a customized plan to ensure your business is ready. At Park, our commercial team has experience helping business owners navigate the succession planning process. Let’s start the conversation.