Forget About Succession Planning—6 Ways to Plan for Success Instead!
As small business owners, we’ve all had the knock at the door or the call from a ‘friend’ who tells you that they ‘do’ succession planning and can find you a buyer for your business. I recently had an interesting conversation with a business broker who assured me that she “did succession planning” with her clients. When I asked her about her process, hopefully expecting a discussion about long-term plans, competencies for key leaders, et cetera, she told me that she had an excellent track record for helping kids in the business buy out their parents.
This is the great myth of succession planning—that it means finding someone who will buy out the current owners. That is NOT succession planning—that is a transaction. And, the stats are clear—more than half of all businesses that change hands, regardless of whether it is an external or internal sale, fail within the next two years. Succession planning means planning for the long-term success of the business. If it is a process that operates in isolation from building a strong and viable company, empowering and educating the next generation to take over, or preparing the business for a sale to a qualified buyer who will continue the legacy of sustainability, promote job creation, et cetera—then it is not succession planning.
I tell my clients to forget about succession planning…and begin to focus on those things that will build a strong company—one that is well prepared to weather the upheavals of transition, whatever form that transition takes. Here are six key steps to prepare for long-term success:
- Cast your mind to the future—what is the potential of this business in 5 to 10 years, particularly if you can remove some key barriers? Use this as your starting point and involve your family or your key leaders in the discussion.
- Develop this picture—call it your strategic plan, or your business plan, or your future plan—whatever it takes, but create a simple plan to move your company in that future direction and share it with others on your team and in your family.
- Once you have a good idea of where you want the company to be in 5 to 10 years and the steps you’ll need to take to get there, start to identify the skills and talent you’ll need in your team to achieve your goals.
- Recognize that your kin may or may not have the skills or talent that you need. Take a look at the requirements and ask: “Can these skills or attributes be taught or are they simply inherent in a person’s personality?” Consider what behaviors you would need to see in others that would give you the confidence to pass on more responsibilities. Remember, however, to get to where you are today, you made plenty of mistakes—that’s how we learn. Be sure to allow others the opportunity to do the same, or they will never learn to manage risk or make effective decisions.
- Develop a simple plan to strengthen your company’s leadership skills—identifying people, other than yourself, who may need coaching, training, or mentoring to be the leaders of the future. As part of this process, determine the role that you, as the owner, leader, or founder, are willing or able to play in providing coaching or mentoring. Consider using outside coaches or mentors—and exploring other ways that your team members can get access to training.
- Finally, consider your own shifting role. To build long-term success, others will need to carry the baton. This is often a very hard shift for a leader. Think about whether you would like to gradually or swiftly pass on your responsibilities to others. Work with your team to identify specific tasks and key decisions that you will no longer undertake yourself. And, most importantly, remember the adage: “Don’t buy a dog and do the barking yourself.” Once you have said you are easing out or taking on fewer tasks—stick to your promise. Nothing is more de-motivating than to be micro-managed or never given the opportunity to get out from under the shadow of a star.
A well-planned transition includes many steps—all of which should focus on creating a strong and sustainable company, a true legacy. So don’t be lured into the trap of trying to ‘do’ succession…it is the outcome of a vitally important process.
DJB’s Business Transition & Family Enterprise Advisory Services team works with family businesses to plan for success today and in the future.