You have insurance to protect your business in case of fire, theft, and accident. So, why would you leave the future of your business to chance? That is what you are doing if you do not have an up-to-date Succession Plan. I have too often talked to business owners who are ready to cash out but cannot because they do not have anyone prepared to takeover or could not get the price they were expecting for their business. This article shows how a well thought out Succession Plan addresses these issues and much more.

Employee Retention: According to a PricewaterhouseCooper study, voluntary turnover is on the rise and even higher for staff identified as future leaders in the company. Every business owner has to face this reality: Your most prized employees are always looking for advancement and will leave if that path is not made clear. Succession Plans lay out that advancement path.

Succession Planning insures the longevity of your business.

Succession Planning insures the longevity of your business.

Selecting & Grooming Future Leaders: It is tempting to rely on your “gut instinct” to choose who will be prompted. In reality, promotion decisions should be deliberate, based on multiple criteria. Does the candidate have the temperament to be a leader? Does their personality match the character of the business? Does their training and skill set match what is needed to take your business into the future? Equally important, the Succession Plan maps out how the candidate will be groomed to be familiar with all aspects of the company as well as strengthen their leadership skills. Of course, the focus and character of a business changes over time. Your Succession Plan should be reviewed annually to ensure it matches those changes.

Avoid Misunderstandings: I have found disagreements of what was “promised” are a primary cause of tension in most closely-held and, especially, family businesses. These disagreements often result in wasteful litigation. The Succession Plan clearly answers the who, when and how questions and is accompanied by any needed legal agreements. Equally important, starting the planning process now elicits and begins the conversation over concerns for all involved.

Financial Preparation: The Succession Planning process, if done correctly, addresses the questions of what will you need to support yourself in retirement and how the business will contribute to those finances. It also focuses on how the next generation will finance a transfer of ownership and its effect on operations.

Avoid Business Disruption: I have yet to meet a business owner who thinks that a medical or other emergency will suddenly take them away from their business. But, as Human Resource Executive Online points out, it does happen to the best of companies and the consequences of not having a proper Succession Plan can be devastating. While you can pay for key-man insurance, you need to also consider the effect your sudden long-term or permanent absence will have on your business and employees. More about this in an upcoming blog.

While it may not avoid all the controversies and complexities, having a current and thought-out Succession Plan in place will definitely minimize them and smooth out the transition process as well as protect your business.

What do you see as the biggest obstacle in the longevity of your business?