Along the lines of ‘begin with the end in mind‘, start this new year with an eye towards identifying who will be your successor and how you will implement your succession plan – even if you anticipate it will be decades into the future.
Here’s a personal story to make my point:
At age 34, my father launched his business with two partners in 1960. The business grew to 5 locations, received many accolades, awards, interviews, etc. In 1982 my father was diagnosed with cancer. By 1984, he was too jaundiced to appear at the office or be seen by clients. That’s when he invoked the buy-out clause in their partnership agreement. He had that exit strategy established from the day they opened their doors 25 years prior when he was young and healthy.
He knew his partners would be his successors if anything unforeseen should happen and vice versa. They had structured their agreement that way from the outset. He never dreamed he would be the one to have to invoke that paragraph of their business plan. But when he needed it, he could and did. They bought him out and the business continued without a hiccup. And my father was able to secure my mother’s financial future quickly and easily.
Many if not most business owners avoid, postpone and in the end fail to plan for their business continuity in the event they can no longer work due to death or illness.
- They subscribe to the naïve theory that they’re too young to worry about succession or retiring or their exit strategy – even after age 65!
- They assume nothing will ever happen to them, they’re too healthy, to vital and too important to the business. The logic they use is: “If I don’t think about the ‘what if’s’ – they can’t happen…”
- They don’t bother to create a business succession plan to address an unanticipated event such as disability or death – which can occur any time.
Ideally, every business owner should start planning their succession, and work himself or herself out of a job from the outset, even in the business plan.
It’s never too late to start today.
With an eye for hiring, grooming and cultivating successors in various aspects of the business, you have time to instill your strengths and values wide and deep throughout the organization.
For CEOs of small and medium size businesses, the business is a primary asset they will need to liquidate to fund their retirement and provide for the financial future of their families.
If you intend to sell your business to a third party, then becoming detached from the day-to-day operations is a straightforward strategic process you need to put in motion.
As the seller, in order to maximize the value you can realize from the business and produce a financial gain, you must shift the value of the business from you personally, to the business itself. The sooner you start focusing on this long-term objective, the better the outcome for both you and the business.
Alternatively, if you wish or intend to keep the business in the family, your choices for successors can shift or be constrained by family requirements, needs and politics.
Succession planning is the responsibility of you the owner, not your management team or the next generation. You must develop your succession plan in sync with your own transition plan to balance the best interests of the company with all its employees, vendors and clients; and the requirements of you the exiting owner who needs capital to fund the rewarding lifestyle you deserve as the fruit of your labors.
Succession planning is only one piece you need in place for a strong integrated strategic plan including operations planning, transition planning and contingency planning.