The key to successful succession planning for business confidence

One of the things that I’ve learned the hard way has been to ensure that not only do I have a Plan A in place for my business, but that I also have a Plan B ready to replace Plan A. And then, that I also have a Plan C that can replace Plan B. If you have already earmarked people to move up a level on the ladder, you can ensure that succession planning works. It’s a far better option than fumbling around and rushing to replace people and then making the wrong choice.

This strategy does require extra time, energy, money and investment as a business leader and owner to budget for these changes in the business, but the return is well worth the effort as succession planning takes away a lot of worries and concerns while you’re leading and growing your business. The extra costs are to ensure that the person earmarked for progress is able to develop the competencies, capabilities, skills and, more importantly, the confidence for them to step into person A’s role as and when needed. You then need to repeat that process ready for person C to step into person

B’s role when the time comes.

It’s all about timing  

Most of the time, you won’t have an exact timeline of when person A may leave, and some business owners may not agree with the extra cost coming in advance of succession planning being put into action.

You can test whether person B has the skills to do the role of person A by asking them to step up in the absence of person A (who may be on annual leave, for example). This temporary secondment gives person B some confidence if they perform the more senior role successfully or it may provide you and person B with an opportunity to do additional training or receive extra coaching.

The alternative to not having such succession plans in place for people puts too much risk on you being able to run your business with confidence while maintaining business continuity. The risk of disruption is always there at the slightest shift in your team.

Planning makes perfect  

Many small-to-medium businesses today cannot name a successor to their business leader or owner should the need arise. Furthermore, succession planning statistics show that the vast majority of US small businesses, even long-standing, successful ones, are facing a critical juncture. According to small business platform Teamshares, nearly two-thirds of small business owners in the US plan to retire in the next two years without a solid succession plan in place.

Many advisors say that succession planning should be started five years before the business leader or owner plans to retire. In reality, however, business owners often want to sell the business when the business owner is feeling ‘burnt out’ and has had enough, according to brokerage firm Link Business.

In such instances, a business owner may not be able to get the full value of their business during the exit process. Other risks of not having a succession plan in place include potential successors leaving due to lack of transparency, putting the business at risk; increased difficulty in obtaining financing; a shortage of the right people; loss of knowledge with the people that leave; and low morale in the remaining team.

Embrace people power  

Being proactive ensures that the right people are going to step up and that they have enough knowledge and experience to take on the full range of responsibilities, and that in advance of this transition they can build their leadership abilities in readiness. This also gives a business owner additional options when exiting a business, as the people in their succession plan may also be the right people to buy the business, making for a smooth business exit process.

Having good succession planning in place allows for a smooth transition of leadership and people, promotes business stability and continuity, enhances people development prospects and reduces the risks associated with leadership gaps.

Written by Shivani Gupta.

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