What happens if a key executive at the helm of the business leaves today? According to a recent report issued by BMO Wealth Institute, less than 40% of Canadian business owners have a succession plan. But life can throw many curve-balls, often at the most inconvenient times. What if a key employee within your company is suddenly unable to work for a period of time? What if a pivotal member of the team quits unexpectedly? Do you have the right back-up team or individual in place to take over?
Typically with small businesses or family-run businesses, the goal is to grow the company and pass it over to a family member or sell it to a business investor, but even those steps require proper planning. Anyone taking on the helm of a business at full company value wants to know that it is thriving and has a strong team in place for continued success.
Here are six tips to help maximize the impact of succession planning on your business:
- When to get started: How long has your company been in business? Some experts advise that succession planning should start as soon as you begin your business. If your business cannot succeed without you today, then today is the day that you should begin succession planning for the future health of your business. Here’s a good outline from the Canadian Business Network that explains what is involved in succession planning.
- Get help from the experts: Succession planning can be a daunting task, which is probably why it often gets put off, especially since it has no immediate impact in terms of business growth. However, there are trained professionals who can help you through this process. Whether it’s a lawyer, an accountant or a banker, it’s important to engage with these professionals to truly understand the financial logistics and tax ramifications behind business succession. RBC offers a free downloadable succession guide as well.
- Get family or your support network involved: If you would like to leave your business to your children, or another family member, or sell it to a business partner or investor, etc., it’s important to sit down and communicate that with all those involved. It’s possible they may not be as interested in the business as you think, or they may be more eager than you anticipated. Either way, communication is key and will influence your succession planning decisions.
- Get the right talent: Every successful business has to consider the team and culture that they are creating – as this arguably has the biggest impact on the bottom line. Most entrepreneurs think they carry the most passion and vision behind their companies, though this is not always the case. Build your team with purpose and surround yourself with a team that has the same fiery drive as you. That talent is out there – the challenge is to find them! The late CEO of Apple, Steve Jobs is a good example of that. As a person and an entrepreneur you could say he was irreplaceable, but he did a great ‘job’ at hiring a leadership team that embraced the same passion for perfection, customer service and technology. This helped develop a culture that lives on without his presence. The best part is, you don’t have to search for such great talent alone, work with experienced professionals who can help you identify people with just the right fit for your company.
- Get your business valuation: Do you know what your business is worth? In order to articulate business value, assess how much your company is worth, so you know what’s at stake if you loose a key player. Entrepreneurs often feel that the business they have put all their blood, sweat and tears into for the last 10 years holds a significant value – but it’s important to not confuse emotional value with marketplace value. It’s best to let the experts confirm what your business is worth. Businesses such as Beacon Brokerage can provide you with a proper business valuation, which will help direct your succession plan.
- Consider who is caring for your stakeholders: In succession planning, it’s important to keep in mind what is important in driving your business. This will help you to consider who you are putting in charge of your key stakeholders. Will this individual or team provide them with the essential services to keep business momentum going?
Succession planning involves putting the right people in place in your team, giving them a long-term vision and path that they can work towards, investing in the proper training and giving them job-shadowing opportunities, and pre-planning to prepare for the unexpected in the event that there is a team shake-up. It takes time, commitment and involves making difficult decisions, but ultimately it can make or break the future success of your company, and as such, is worth every step.