For small businesses and partnership firms, a robust succession plan is a prerequisite. Such businesses often fail for want of a proper succession plan in case the owner retires or becomes incapacitated or if the partners don’t get along well and decide to call it a day. So proper succession planning is essential to running a family business.
However, a proper succession plan may not always exclude outsiders. In fact, there are family businesses that are no longer in the hands of the founding family or families. They are being run by others, but they are thriving.
What is essential is to identify family members who are qualified enough to assume leadership positions. If the plan fails, you need to consider someone from outside the family. The moot point is to see that the small business thrives even if the founding families sell it off.
However, to arrive at a proper succession plan for small business, you need to plan early and make decisions solely on business needs. You may also need to adjust the plan according to the changes in situations, if any. Since succession planning necessitates a wide range of skills, you might be better off with a professional succession planner.
However, in case of succession planning for small business the long-time bookkeeper or accountant can very well do the job of an advisor.
Steps Involved in A Succession Plan for Small Business
- Choosing the Successor
This is the most important step in any succession planning for small businesses. You need to first look within the organization, analyze the characters, skills, characteristics and tempers of employees with the right leadership skills. If you think that there is a shadow of partiality in the assessment, take the help of impartial consultants outside the organization.
- Developing a Training Program
After the successor is chosen, you need to see that the person is given formal training to help him develop into a proper successor. To that effect you need to identify critical roles and areas in the organizations which would prove the mettle of the person. The leader is expected to have a thorough idea about the workings of the organization and not just about the duties, like an ordinary employee. The planner successor may make mistakes, but you need to see whether he repeats them or not.
- Setting a Timetable
This is very important; you can go on training someone indefinitely. There has to be a timetable and the chosen person has to develop into an able successor to the founder. If he or she does so, you have your task cut out – decide when to hand over the reins to the successor. If he does not, you need to pick up another one after a more thorough search.
- Selling Your Stake
As the succession plan takes off and proceeds smoothly, you may sell your stake in return for cash or assets. This will ensure a good retirement plan for you. In fact, it always augurs well for the founder to sell his stake before retirement, especially if the business is being handed over to an outsider. However, some people also sell their business interests during retirement or after their death to the family.
Whichever way you develop succession planning for small business, you have to maintain a balance between business interests, your interests, and emotions that are attached with family founded businesses.