Many people think of succession planning as an old person’s problem – something you do once you decide to exit your business. This is far from the truth, although it's not surprising the misconception exists.
In planning this blog I conducted a quick Google search of the question 'what is succession planning?' to test the common perceptions. The first result (from an Australian government website!) provided the following answer: "A succession, or exit plan outlines the things you will do when you sell, close or transfer ownership of your business."
I beg to differ. Succession planning should not be something you do when it's time to exit: it is a young person’s pathway to building a valuable business.
Succession planning is about creating a sustainable business that will continue to operate successfully into the future, whether you stay in the business or not.
Wikipedia had a much better definition:
Organizations use succession planning as a process to ensure that employees are recruited and developed to fill each key role within the company. Through one's succession-planning process, one recruits superior employees, develops their knowledge, skills, and abilities, and prepares them for advancement or promotion into ever more challenging roles. Actively pursuing succession planning ensures that employees are constantly developed to fill each needed role.
We’re big supporters of succession planning and having a succession plan, and we provide advice on this area of business to our clients.
When should I start succession planning?
If you are a business owner or director of a company that has been operating for some time, and you’re only now saying “we need to create a succession plan”, you’ve already missed a great opportunity to build incremental value.
However, while it’s never too early to start thinking about your succession strategy and developing the skills of your team and business capability, it's also never too late.
The first thing the leader of a mature business should do is sit down with senior staff and/or family members and talk about their succession goals.
How to use our Business Succession Scorecard
We have created the Business Succession Scorecard so you can rate your business’ preparedness for succession based on several key parameters:
- Decision making
- Forced exit
- Business transition.
The final items in the scorecard – Forced Exit and Business Transition – are really the acid tests for determining whether your business is sustainable and has value i.e. will it survive without me, and let’s see what the market thinks!
If you have future-proofed your business by having a well thought out and implemented succession strategy, the business should thrive even if you’re not there, and the market should reward you.
If you would like support to develop a succession plan for your business, contact the team at JPAbusiness on 02 6360 0360 for a confidential, obligation-free discussion.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.