When you own a business, it’s extremely normal to feel like you’re surviving one day to the next – ‘winging it’, as the saying goes. With so much to think about, worrying about the present moment and immediate future can consume your focus. It doesn’t leave much capacity to plan what will happen to your business once you retire, or if the worst happens.
But when it comes down to it, having a plan in place to deal with this will save a lot of time and stress later on, particularly should something happen to you. With that in mind, we’re shining a spotlight on just how critical it is to think about the future of your business, years, even decades, in advance.
More specifically, we’re looking at the idea of succession planning – something that businesses of all shapes and sizes can implement.
What is succession planning?
Succession planning is the process of deciding who will take your place running the business once you leave. It’s all about ensuring that the right people are ready to move into key positions if and when you (or another major person in the business) step away from their existing role.
This could be for any number of reasons, such as retirement or simply the desire to move, and could apply to any key position within the business.
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Does my business need a succession plan?
Contrary to some misconceptions, succession planning isn’t just for large companies with huge revenues, hundreds of employees, and complex organisational charts.
A succession plan ensures that your business always has the relevant talent, skills and knowledge it needs.
In fact, succession planning also has significant benefits for small businesses, adding structure and direction. Planning ahead like this essentially protects the ongoing value of your business and its workforce.
How does succession planning work?
It involves assessing the impact of each key role within the business – even if it’s you doing all of them yourself! Succession planning is about identifying the people who could potentially step into those roles, or ensuring that you’re ready to recruit right away if needs be.
This can be quite a revealing process, and you might find yourself thinking about ways you can nurture and develop future leaders. It will help ensure that the business can still function as time passes, and its organisational chart evolves.
Why efficient succession planning is so important
Succession planning is particularly critical for business owners who want their business to be in good hands when they eventually decide to move on.
As we mentioned above, this departure could be for a number of different reasons, the most common including retirement, starting a new business, or passing the business down within the family. It’s an exit strategy of sorts and all part of creating an entrepreneurial legacy.
Making succession seamless
If the business owner or key members of staff are heading towards retirement, succession planning allows for a more seamless transition with minimal disruption. Having a ‘business as usual’ approach reduces the impact the changeover might otherwise have on operations.
Likewise, if you plan on handing your business over to a family member (or members), preparation can simplify the process. Managing a family business is no mean feat thanks to the additional complexity of emotional investment. A plan will help to ensure the transition runs as smoothly as possible.
A plan is only useful if everyone knows about it.
Yep, we’re putting an emphasis on that because, as always, communication is key. Everyone in the business needs to know what the plan is, and how it should be implemented. Particularly for the sake of future harmony if you’re dealing with a family business.
Keeping knowledge within the business
When people leave the business, they take their experience, skills and knowledge with them. Short of chaining them to the floor, a robust succession plan will make sure that you extract as much of this information as possible. That way it’s available to pass on to those who remain.
Even beyond succession planning, it’s good business practice to put systems in place which enable knowledge transfer. It avoids the business becoming too reliant on one single person, plus it’s a useful way to educate the next generation of employees.
A clear direction and better decision making
Without clear organisation and focus, you can’t possibly make the best decisions for your business. If you take each day as it comes and only ever improvise along the way, you’ll miss opportunities and run the risk of making ill-informed mistakes.
Devising a clear succession plan, on the other hand, is much like a business plan. It will allow you to operate proactively, rather than relying on reactive action all the time.
When you can see the road ahead and you know where you’re going (or trying to get to), you can move forward with strategic purpose. For instance, it makes it easier to spot skills gaps in your workforce. Identifying these early helps you address this with targeted recruitment or training before it becomes a problem.
Managing multiple businesses successfully
Many entrepreneurs find themselves with fingers in many pies over time, which is great. We’re all only human though, and spreading yourself too thinly can badly reduce your ability to perform. Take it to the extreme, and it might even result in burnout. It’s more common than you might think. If you reach this point, it might be time to step back or decrease your involvement.
Or, perhaps it’s not a case of being spread too thin, but rather that you’re simply ready to move on to other entrepreneurial challenges. A robust succession plan allows you to focus on your next venture, without your existing businesses losing the ground you’ve already made.
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How can I make my succession plan more effective?
Now you’ve got a better understanding of why succession planning is such a vital part of your business development, let’s take a look at what you can do to make your succession strategy successful.
Ongoing leadership training and professional development
This could include anything from external courses or cross-team training to mentoring and shadowing. You might even tie this into the way you set goals and KPIs (Key Performance Indicators) for staff.
It applies to workforces of all sizes, from small teams to large organisations. Educating the next generation of employees is important whatever the scale of your operation.
Not only will investing in employee development be good for the future health of your business, it boosts morale. Demonstrate to employees that you care about their career paths and value their contribution to the business.
Overlap roles at relevant opportunities
We covered the importance of knowledge transfer and retention within the business further up, and sometimes one of the best ways to secure this is to overlap roles where relevant. For example, if somebody in a key role goes on maternity leave, consider moving someone in the business into the role temporarily, rather than recruiting externally.
Of course, this won’t always be a viable option but where possible, overlapping roles helps to cultivate a workforce of well-rounded and highly-skilled next-gen employees.
Align your strategy with business objectives
When developing a succession plan, it’s vital that you align your strategy with your business objectives. That way, you can be sure that your plan supports your goals, timelines and processes. Any succession plan you put in place needs to be built around these to ensure that all parts of your business are working (and growing) in sync.
Don’t just think linearly
When it comes to your organisational chart and ensuring that there is talent in the pipeline, you don’t always have to see this as a linear trajectory. Successors moving into key roles don’t always have to be the natural, obvious choice made through conventional upward progression.
For instance, if somebody from a different department shows potential (and an interest) in another area, it might be worth training them up!
Succession planning is a long-term process
Successful succession planning requires a great deal of consideration. Analyse your current situation, and plan what your business needs in order to continue into the future. Training, recruitment and professional development all take time, so it’s crucial to adopt a long-term view when devising your succession strategy, rather than focusing too much on the immediate future.
Check in with your accountant
OK, we’re accountants, so we’re always going to advise you to check in with yours before making any big decisions affecting the future of your business. But, we’re not just here for tax returns you know. Planning successful growth is something we have a lot of experience in!