Every business owner must create a succession plan. A succession plan is a transition plan, which guarantees that things happen in the best interest of your business, come what may. It lays out step-by-step procedures to be carried out if the business owner or a key employee leaves the business to pursue new ventures, or because of illness or untimely death.
You must include four essential elements in your succession plan, namely, time frame, successor, operating principles, and the value of your business.
1. Timeframe. First, create the succession plan well in advance. Most business owners make the mistake of avoiding succession planning considerations until a vacancy arises. Also, prescribe a time frame for effective succession; a successor must fill the role by a set date for the transition to be smooth and not interrupt the business flow.
2. Successor. It is wise for the owner to know who the successor will be. While they might not yet be aware of it, the owner should train and develop proposed successors to prepare for their new role. It takes time to establish safe relationships and have necessary deep conversations about the business. Successors might be co-owners, family members, key employees, or someone new.
3. Operating Principles. The business owner must have a system to record and formalize the day-to-day functions of the business. It would be best to document the standard mode of operation for your employees and managers to refer to. This prepares the ground for your successor to be effective.
4. Value. You must be clear about your business's value (worth) and make sure your employees and successors understand it. Do not assume your business is healthy. This can create a false sense of security that will be costly when a successor takes over and meets with debt or other financial difficulties.
Having a well-thought-out and documented succession plan will prepare your business for unforeseen events that may occur without devastating or disrupting the success of your business.
To make sound business decisions regarding succession planning, your need advisors. Do not try to do it all by yourself.
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