As you work long hours to build your business, the question of “What’s next?” may be far from your mind. You’re focused on the right things, but putting off succession planning could lead to the demise of what you’ve worked so hard to build. It’s important to consider what will happen to your company when you decide to move on either voluntarily or involuntarily. Will succession happen by default or by design? You get to choose.
When you choose to design your company’s long-term future, you gain many benefits including peace of mind when it’s time to take your next step. You’ll be in control of your company’s future, and you won’t have to watch your business – your years of hard work – dissolve into nothing or is co-opted by an owner who doesn’t share your vision. Here’s how to get started.
Your Goals for Exiting Your Business
The succession planning process is much easier if you know the goals you have for your business. There’s a saying that it’s wise to “begin with the end in mind,” and this is especially true for business. Ask yourself:
- Where do you want to go with your company?
- Are you creating a legacy to pass down to your children?
- Are you building the business as a retirement vehicle?
- Do you have a valuation to reach before you are willing to sell?
- Do you want to retire at a certain age?
- Do you want to hire someone to groom for leadership when you’re ready to step down?
When I started my chemical business, I knew it would be my retirement plan. I had specific goals that I took action towards every single day. I was prepared for the inevitable opportunity to sell when the offer was presented. You can be prepared too. Set the goals you’re aiming for now, and you’ll know when it’s time to take the next steps in the future.
As you work through your succession planning, you’ll want to brainstorm candidates for possible succession. Although you may not know who will be right to fill those shoes when the time comes, you should still identify the qualifications your successor needs.
Start by writing down the vision and passion you have for your business – not just for today, but for the future as well. You can keep your eyes open for the right successor who shares those long-term dreams for the company.
Next, focus on what you believe about culture and how the company should be run. Write out the values and policies that you intend to put in place in your business. Someone who follows after you should have a commitment to keep those policies and the company culture going.
Finally, think about the skills and education your successor will need. Do you want someone who has come up through the ranks of the company? Do you intend to train one of your children or relatives to run the business after you step back? Do you want to be acquired by a larger firm? You’ll need to make plans for the training and education of your successor.
The final important consideration in your succession planning is how you’ll exit. Ownership transfer is key and will need to be mutually agreed to. Will you do an immediate buyout or a stock transfer? Will you install someone and give them an earn-out provision or simply hand over the keys?
You should also consider what role you will have in the company as you transition out of your leadership role. Many times departing CEOs remain in an advisory position, or they join the board. However, this may have the effect of stunting the growth of the new leader if the CEO holds too much power or influence on decisions. You’ll want to carefully consider how you can help, and not hinder, the future of your company as you transition.
Most business owners procrastinate when it comes to succession planning. The key to succession or exit planning is getting the most for your business. The earlier you start with the end in mind, the more prepared you are to sell. Now is the time to start succession planning, and I can help. Schedule an initial consultation and let’s get started protecting your legacy today!