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5 simple steps to succession planning

5 simple steps to succession planning

Posted on: May 27, 2014
Author: ATB Business & Agriculture

As an internationally recognized small business expert, Andrew has travelled all over the world to train small business owners.

 

You've toiled away at your business for many years. You've had high (and probably low) points and achieved some success. You have a business plan in place outlining your goals and objectives for the next couple of years and a solid financial plan, but there's one type of plan that you might not have: a succession plan.

Many business owners find that when the time comes to finally hand over the company keys to a worthy successor, they have no idea how to proceed. But the truth is this: the evolution of ownership of your business is inevitable, whether it's through choice, financial need, health reasons, or even death.

Did you know?

58 per cent of Alberta businesses don't have a succession plan. And of those 55 years old or older, almost half (48 per cent) don't have a succession plan. (ATB Business Beat)

Having a succession plan in place is not only critical to your business's ongoing success, but also to guarantee your family's future security. Here are five simple steps to ensuring your legacy is left in good hands.

  1. Consult a team of professionals

    As a business owner, there are four types of professionals you should consult when formulating a succession plan: your accountant, lawyer, banker, and financial advisor. The use of these professionals' services will round out your management team and ensure a smooth transition when you exit your business, and will also help with your estate and retirement planning.

  2. Identify potential successors

    Believe it or not, many business owners don't yet know who will one day take over their business. Not everyone has an obvious candidate—such as a son or daughter—who knows their organization inside out and can easily fill their shoes when the day arrives. Your successor could be a family member, a friend, or even someone in the company who exhibits excellent leadership skills.

    Whoever your successor may be, they should exhibit certain traits and characteristics. He or she should possess good management skills, be able to work well with others, be trustworthy and honest, and know the value of hard work. Start vetting candidates for the role as soon as possible, and above all else, ensure they have one extremely important quality: a passion for your business.
  3. Develop a written succession plan

    Your written succession plan typically covers five to ten years up until the transfer of ownership, and should outline the various positions, expectations and responsibilities the successor will fulfill. Your plan should also include a timeline detailing when you plan to retire, transfer the ownership of the business, and hand over voting rights to your successor. Remember: your succession plan isn't final. It can be re-visited and modified during the period before the transition dates take place.
  4. Assemble a Board of Advisors

    A Board of Advisors is a trusted group of professionals and non-competing mentors that will be used to advise the current management and future successor during the transition period. Their purpose is to help the new management with any and all aspects of the business to make the transition as smooth as possible for all involved.
  5. Begin the exit strategy

    The final step in the succession planning process is to begin the exit strategy itself, and it starts with making an official announcement of the date you plan to transfer operating control to your successor—typically 12-18 months from the actual transfer date. The exit strategy involves transferring all ownership and voting rights over to the successor, as well as initiating your new plan to continue your standard of living based on a retirement plan.

It's never too early to start carving out your path to an exit. Planning ahead will not only allow you to prioritize your company's goals, but will also strengthen your company. Keep an eye on your end goal and start working towards it now to safeguard your business's future.

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