Article by Ryan Roux and Ivy Gura (BDO Audit Seniors)
Succession planning is not always top of mind for small businesses and family-owned operations caught up in day-to-day operational issues and chasing new business.
A large percentage of businesses do not survive the move from founder to next generation because topics such as old age, death or illness are avoided instead of addressing the issue of succession planning. The reality is, identifying and mentoring talent should form part of any business strategy to ensure the longevity and future success of the enterprise.
Deciding who to hand the baton over to requires careful consideration, especially when the individual will be continuing the legacy of a family-owned business. BDO Audit Senior Ryan Roux has identified four tips for small business owners to consider when making succession plans.
Define your objectives
It is important for business owners to have a clear picture of what they expect their business to look like in the medium to long term. This will help determine what type of skills are needed to ensure that future goals are achieved.
Next, business owners need to identify the type of individual they envision taking over. Should it be someone with a similar management style? Will the proposed individual be a good culture fit for the business? Will the person be an asset to the business, furthering its goals and boosting growth? Will the person be the best person to direct the company to the picture management has for the medium to long-term?
Astute business owners understand the importance of identifying talent within the organisation and grooming them to fulfil more complex roles in the future. The sooner this process commences, the quicker and easier it will be for them to step into a more senior position.
Don’t rely on keeping the business in the family
Many business owners dream of keeping the business in the family, hoping their children or grandchildren will be chomping at the bit to take over the reins. Often this is not the case.
Even if family members are keen to steer the ship, they may not share the passion, drive or expertise needed to make it a success. Business owners need to set aside romantic notions about their family members and be more objective and strategic in choosing a successor.
It is, however, important to discuss plans with family members and involve them in the succession process. Not to do so is one of the fastest ways to sow discord and inflame resentments. The succession process should be discussed with family members regardless of whether they are expected to take over or not.
Don’t put all your eggs in one basket
So, the perfect person has been identified for the job. A lot of time, effort and resources has gone into developing and mentioning the individual. And then the person decides to leave for greener pastures.
From happily contemplating retirement, the business owner must now put everything on hold to find another suitable candidate for the position. This situation could have been avoided if several potential leaders were identified and nurtured up front.
Plan ahead, review regularly
Ideally, succession planning should commence when the business has gone through the more difficult start-up phase and is well established. By this stage, the business’ vision, culture and values should be well entrenched, making it easier to identify potential candidates for the top job.
Reviewing the succession plan on a regular basis allows business owners to examine the wisdom of their choices. If potential successors are not living up to expectations, they may need additional training and mentorship, or new candidates may need to be identified.
A succession plan needs to be a live document that constantly keeps abreast of human resources and other business-specific changes and challenges.
There is a popular adage often attributed to Benjamin Franklin, the father of time management, “Failing to plan is planning to fail“. Following the above tips provides a good baseline for succession planning in any family-owned business. Never be caught unprepared.