Business Succession Planning a Must

“Business Succession Planning” A Must For 2009

Business succession planning seems to have lost its way in recent years. Maybe it is due to the stress of the economy, maybe it is because the current and next generation views business differently, or maybe it is due to the new technology that continues to create new challenges and complexity for businesses. At Leanovations, we encourage businesses to include “Succession Planning”, during their annual “Business Strategic Planning Session” utilizing Plan-Do-Check-Act Process (PDCA).

Leanovations works with a number of small businesses (including many family businesses) to develop Succession Plans. Business succession planning must include a plan for transferring the trust, respect and goodwill that built up over the years. Generally, setting up a successful business succession plan involves the following 5 stages:

1. Selecting and developing a Team of Qualified Advisors – Developing an Advisory Business Council (at Leanovations we call this an ABC Team) to provide insight into Business opportunities, decisions, planning and general counseling with qualified advisors is recommended. This may include an accountant, attorney, financial planner and some industry leaders who can help assure that your plan legally, profitably, and affordably considers the business needs and objectives.

2. Investing in People and Recruiting Talent - Investing time in developing people in key management positions, and allowing them to exercise authority and control, is vital to a successful transition. It is important when the business is closely held, such as in a family, to separate the family dynamic from the business dynamic as much as possible. For those experiences and leadership skills needed to have the business prosper, that are not evident in the current members, it is required to recruit outside individuals to these key management positions. Hiring good people and being able to retain them, always pays dividends and is an important part in succession planning. For family businesses, this often involves a tough analysis of whether family members have the skill set to run the business or whether your key succession candidates are non-family members.

3. Commitment to a Transition Plan—Once a transition plan is developed and successors identified, the owners must be committed to the concept that the business must continue to create opportunities for generations to come. Once a succession plan is in place, the owners need to communicate that plan clearly.

4. Communication -- Communication of a succession Plan gives key management and/or family successors, if a family business, a clear understanding of the path to the future, as well as any role they may play. It also allows them to begin setting future goals and objectives for themselves that support the business. Ensure key employees remain with the business during any succession transfer by sharing the plan with them, keeping everyone involved with the plan and on the same page.

5. Implementation – Having the business continue into the future, without compromising current business owners needs is the most important step (and most difficult) in implementing the succession plan. The owners must be ready to step aside and allow the successors to take over. The owners must be prepared to take on new challenges away from the business, knowing the financial future is secure. As in any other Planning process, always be prepared to adjust and modify as needed. Using the Plan-Do-Check-Act/Adjust process (PDCA) is a perfect fit for creating and developing a robust “Business Succession Plan”.