Succession Planning is a Must

Succession planning is critical to the survival of a business.  Without a good succession plan the value of your business may well exit when you do.

While most business owners acknowledge the need for good succession planning, in practice they are shockingly bad at doing it.

Reasons Why Succession Planning Gets Overlooked

The reasons I hear from those who fail to plan for succession are many and varied, such as:

‘There is no need for me to groom my business for sale.  I will simply give the business to my son/daughter/children when the time is right.’

‘Hmmm, succession planning is really important.  That said, I’m too busy looking after my customers right now.  Let’s discuss this next month/year/decade (delete as applicable!).’

‘Without me in the business, it’s worth nothing anyway.  So why bother with succession planning?’

So how do you get focussed on succession planning?  Here are five tips:

1. Acknowledge the true reasons behind your failure to implement a business succession plan. The first step is to acknowledge that the failure to address these issues is emotionally, not logically driven.  No one likes confronting their own retirement and mortality.  It is similar to why people delay making a will.
2. Ask yourself ‘What do I want to achieve in my life?’ Before you can create a business succession plan, you need to spend some time reflecting on your life goals (not just financial).  These may include travel plans, charity work, buying and developing property, spending time with grandchildren or setting up a new business.  Once you know what you are aiming for, you can start planning how you are going to achieve it.  It will start you thinking about how much money you will need to fund those goals.  You can then build the achievement of your succession planning strategy into the broader strategy for your life and business.
3. Tell someone. Committing to a course of action is much easier when you have someone to keep you accountable.  One business owner I know has written the precise date of his retirement in black pen on his office whiteboard for all to see.  It fires him up to count down the days and years to his succession and serves as a reminder to staff of the challenges and opportunities that lie ahead.
4. Seek the right assistance. Work with a business coach, financial planner, psychologist or other suitably qualified professional to address this.  While it is also crucial to discuss your business succession plans with family members, recognise that they may sometimes not be best placed to help you in the early stages.  They may have a vested interest in your decisions.  They may want to own the business themselves one day or they may be hoping that you will sell.  Or they may simply be too emotionally close to provide the necessary objectivity.
5. Create a plan for your life post-business succession. Take time to plan for the next stage of your life and career before embarking on the succession planning process.  Without a clear vision for the next phase of your life, you may be less engaged with the process or your judgment may become clouded by non-business issues.  The question of what next could include any number of roles either inside or outside the business, but they should inspire you.  If you are not excited about the next stage, how can you ever expect to stop procrastinating and execute a successful business succession plan?

Martin Checketts is a corporate lawyer and business succession expert based in Melbourne Australia, assisting private and family owned businesses achieve maximum profits on the sale or transition of their business.  For any questions you may have about succession planning, email Martin at mchecketts (at) millsoakley.com.au