Succession planning. Heard of it? Too often it is one of those last minute thoughts or assumptions on the mind of a small business owner. If that’s you and you are, well, getting up in years, I’m hoping you’ve given thought to who will replace you as owner or CEO. Most small business owners have involved, or attempted to involve, their sons and/or daughters through the years in the hopes that one of them will rise to the occasion and be a fitting candidate. However, many a company went down the tubes when a disinterested child or grandchild with a sense of entitlement was placed in charge. Just because they are family doesn’t mean it is in their best interest, or that of your few or many employees, to pass the business down to them.
Making the decision of who will run the company after you are gone requires a real test of will, a lot of truth seeking and a solid relationship with your attorney and accountant. Depending on your age and how invested in the business your spouse or children already are, start setting the expectation early that the person who is most equipped to lead will be left the responsibility to do so-and that it won’t necessarily be a family member. This is also dependent on whether those under consideration are interested in your leadership role.
But how do you determine who those candidates should be? No less that 5 years before your retirement, start doing the following:
- Identify the key people you are most interested in assuming your role
- Start having conversations with them on whether there is an interest in leading-but that you are making NO promises
- Plan on rotating them into a variety of roles and solicit honest, no- holds-barred input from their direct managers on their performance
- Invite them to higher-level meetings
- Start having them lead meetings that you sit in on
- Give them teams to supervise with the understanding that there will be performance input from those team members
- Be transparent. Let them know where they are failing and succeeding, what your fears are
- Continue to encourage learning and leadership
- Continue to have conversations about their commitment, their vision for the business and stay open-minded to their ideas
- If you choose to leave someone not related to you in charge, consult your attorney and accountant on how to protect your family member’s investment in the business
Don’t wait until the last year to explore possibilities. Succession planning should be part of your small business vision from the beginning. But if it isn’t, don’t wait to catch up!
by Steven Schlagel