Business Succession

You Started Your Own Business, What Happens When You're Ready to Stop?

People procrastinate creating their succession plans for plenty of reasons: they're too busy, they don't want to tackle a big project, they'd rather not make decisions for the future. But there's one hurdle that can seem impossible when it comes to succession planning.

What if there is no one to succeed you?

This may happen in a small family business, but it can also occur in larger firms. If you decide not to create a succession plan, you're essentially deciding to let the company dwindle when you leave. It's that simple.

No one in the family is interested.
When you've put your heart and soul into growing a family business, it can be discouraging to realize that no one in the family wants to succeed you. They may all have plans and careers of their own. In some cases, you might have family members who still work for your business but who don't want to be in charge.

No one in the family is qualified.
On the other hand, you may have members of your family who would like to succeed you, but they don't have the skills or experience to be successful.

No one currently in the company seems to be the right fit.
Even if the family isn't involved, succession can seem more comfortable when someone you know well takes the reins. But what if no one om the company seems right for the job?

The following steps can help you plan your company's succession, even if you don't currently have a successor.

Establish a timeline.
By starting your succession planning with an established timeline, you can narrow your list of successors, institute transition periods, and impose accountability on each step of your process.

Regardless if your retirement is three years or thirty years away, you should have a good idea of when you'll want to move on. Even if you never want to retire fully, you ought to have someone in place who can take over if you become incapacitated.

Focus on Skills Instead of Relationships
Friendship and family relationships often impose themselves on your decisions when it comes to business succession. Instead of thinking about these relationships, consider where you want the business to be in five years.

When you have a clear vision of your company's future, think about what kinds of skills and experiences will help the business to get there. For example, if you'd like to see your business develop innovative new products, you may need to tap a leader with significant research and development achievements.

Find the Right Fit
Once you have a clear vision of the new leader's role and function, it's much easier to seek candidates. You might be surprised how much easier it is to seek a successor based on traits rather than on relationships. When personal feelings and relationships take a backseat to skills and experiences, business owners often feel a burden lifted from their shoulders.

You may find your successor in any number of places. They may have been working with suppliers or even competitors. You may have found them through mutual connections or even through an online listing or recruiter. Eventually, you'll find the right fit, and you can begin the transition.

Start the Transition
Ideally, you'll be able to transition control of the company at a measured, even pace, slowly turning the reins over and giving your successor challenges one at a time. Since we don't live in an ideal world, you should be prepared with contingency plans.

For example, some business owners have to exit the company suddenly due to an accident or injury. When this happens, successors must rise to the occasion and do the best they can. The more work you've put into your succession planning, the more likely it s that your successor will thrive in such a circumstance.

A business succession plan makes provisions for risk management, personnel changes, the retirement of the previous owner, valuation and buy/sell agreement information, communication of the strategy to all stakeholders, and legal considerations. With so many aspects of the business carefully managed and considered, your successor will be well-positioned to succeed and take the company where you intend it to go.

Seek Expert Assistance
Expert, outside help is invaluable when it comes to succession planning. You're busy with the day-to-day operations of your business, and you may not have the time to consider all the logistical, legal, and financial factors affecting your succession. To learn more about succession planning, or to speak with us about any other business topic, set up a consultation with us a Croghan.

How to Ensure Your Business Will Thrive Without You

Succession planning can seem daunting, maybe even depressing for some. After all, planning for someone else to take over after you've left the company isn't exactly the most exciting prospect.

But if you're planning on retiring at some point, or even hoping to step back from having an active role in the day-to-day business of your company, then having someone ready and waiting to take over is crucial for your company's continued success.

Succession planning often takes years to facilitate, so it's important to start early. Here are a few things that help prepare for a successful exit.

1. Build a solid foundation.
The key to a successful transition is to start building a solid foundation right from the start. Don't make the mistake of designing your company to depend on you. Instead, try and work towards implementing clear systems that someone else will be able to seamlessly step into and follow. That way, when you exit, your company can function just fine in your absence.

2. Set target dates.
Before you start looking at potential successors, it's important to commit to a target date. Setting clear goals and milestones and working backward from there enables you to have a more effective and actionable plan.

3. Identify key roles.
Identify crucial roles in the company that will need to be filled. Depending on how you've scaled your company, you may need to think about the many different roles you have in the business. If you're sourcing your successor internally, you'll need to fill their position as well.

4. Define the competencies required for these roles.
Decide what skills are required to fill the roles you've identified. Once you've established this, you can start assessing people based upon these criteria.

5. Plan for the future.
When sourcing talent or looking for a successor, it's a good idea to look to the future. Don't just think about where your company is now, but ask yourself where it's likely to be down the road. Your ideal successor maybe someone that brings an entirely different skill set to the table.

6. Prepare your team.
It's important to have employees and management who are just as invested in your long-term vision as you are. Having a solid supporting team can help make the transition much easier for everyone. In order for your successor to thrive, your team has to be on board and fully support them.

7. Train and empower your successor.
There is no such thing as a "ready-now" successor. Even the best candidate will require some training to prepare them to take over your hob. They'll get there in time. Give a potential successor some of your responsibilities at a time.

8. Implement measurables.
Finally, if you're planning on retaining some measure of involvement after stepping back, it's important to implement a system that will track how well your successor is managing the company. This holds people accountable, measures success and gives you peace of mind when you review the numbers.

Every succession plan will be different and should be designed around the needs of your company. The best plans should flex and change along with your company's requirements.

How To Make Family Business Succession Successful

For family businesses, it's smart succession planning that can be the key to sustaining the company in the future and keeping it flourishing. Problem is, few family business owners are doing a good job preparing to turn their enterprises over to the next generation.

Start Succession Planning Early

If you're a family business owner expecting that one or more of your children will take over the venture at some point, the earlier you can start planning for that transition, the better. Long-term succession planning can give your child or children time to learn the management tasks and for you to see how well they're executed.

Which Child or Children Will Take Over?

The most important thing to work through is determining which child or children will run the business and when that will happen. Some owners mistakenly assume a specific child can take over the business when the reality is the son or daughter lacks the appropriate experience and expertise.

Diminishing Interest by Younger Generations

One challenge is that fewer members of the younger generation these days are interested in working in the family business, let alone ultimately running it.

Working With a Family Business Adviser and Business Succession Expert

Assuming one or more of your children are interested in owning and running your family business, you'll likely want to work with a family business adviser to help make the succession smooth. The adviser can objectively discuss with you the pros and cons of handing over the reins to one or more of your children versus bringing in an outsider to run the company. A family business adviser can also be especially helpful in working with you to draw up necessary succession documents.

Begin working with the Business Succession Experts at Croghan Colonial Bank. We'll be by your side from start to finish to help you position yourself financially for your retirement. With an experienced commercial lending team and a local wealth management department, we're here for you as you plan your next phase in life.

Letting the New Owner Take Over

Once you do hand over the company to your child or children, allow your new owner or owners to run the show.