Three Important Aspects
of Succession Planning
An overwhelming amount of business owners lack an adequate succession plan. They feel overwhelmed by the process, distracted by the daily challenges of running a business, or think it’s too early to begin planning their exit. The truth is that all businesses need a plan for the future, and exit planning is key to this process. These three aspects of succession planning can help you better anticipate the future.
Create Your Vision
What do you want for the future of your business? Be honest. How long do you intend to stay on? What are your financial goals after you leave? These queries can help you get specific:
- Do you want to keep your business or sell it?
- Do you want the business to remain in the family?
- Are there any concerns or feuds over the selection of a new leader?
- What will happen to the business if it is sold?
You don’t have to be wedded to the goals you set. The idea is simply to begin cultivating a vision of your ideal future so that you can begin shaping your daily operations in service of that vision.
Identify Potential Successors
Who might take over your business if you leave? For family-owned businesses, the answer is often a family member. This is fine, but it’s important to weigh that person’s willingness and ability to run the business when you leave. Work with an exit advisor to develop a well-run process for choosing your successor.
If you intend to sell, consider how to help your business be a more attractive target for investors. Can you think of competitors who might be interested, or other individuals who have the skills necessary to operate your company? Begin growing the business with these potential successors in mind.
No matter whom you choose for your successor, be sure to evaluate them on skills such as:
Having the ability to make key decisions.
- Team-building and interpersonal skills.
- A shared vision for your business’s future.
- Flexibility and adaptability.
- Thoughtfulness and a willingness to innovate.
- The ability to be an inspirational leader, not an abusive micromanager.
Make a Contingency Plan
Preparation is a cornerstone of success. So the third step in any contingency plan is to anticipate catastrophes. What will happen if there is a sudden crisis in the market? What if your intended successor loses interest, or no longer has the financial wherewithal to take on the business? Much of your contingency plan is about getting the right people on your team—exceptional managers and skilled staff—who can run the business in your absence, and gently help it navigate a crisis.
If you’re not sure where to begin, consider working with a succession planner. They can help you consider issues you might not otherwise weigh, discuss how various exit plans could affect your finances, and help you set reasonable expectations about your business’s final value when you do decide to exit.
About NuVescor Mergers & Acquisitions
At NuVescor, we align the interests of investors and business owners to enable the personal and financial goals of our clients. For over a decade, we have helped founders and owners of companies in the manufacturing sectors achieve maximum value for their companies. Together, we can provide business valuations, financial analysis, investment guidance, and business transaction advice for middle-market companies with revenues from $5 million to $500 million.