When we talk about succession planning, we don’t want to give you cause to worry. But our message is this: start as soon as possible.
The best time to plant a tree was 20 years ago. The second best time is today. But don’t rush: everyone’s plan will be different because everyone’s priorities are different.
Here are the most common succession structures and what you need to keep in mind when planning your own.
What is succession planning?
As the head of a business, you’ll want to make sure that when you do decide to step down, you have someone who can fill your shoes and keep things running.
Having a seamless transition will be essential for the business to keep functioning with minimal interruption. Even if you still have a few years left in you and don’t want to retire right this second, succession planning takes a lot of, well, planning. The clue is in the name.
What does succession planning involve?
No matter your business structure – whether you’re a family-owned operation or a larger limited company – you’ll have to make sure whoever steps up to take over is trained and ready.
The sooner you start the training, the better. Preparation is the key to success; you certainly don’t want to set someone up to fail.
If you decide that you don’t have a suitable internal candidate, you’ll need to start a recruitment drive and hire your replacement. This could be to come straight into the role or hire someone to then train to fill your position.
What succession structures are there?
There are a few key ways of transferring ownership of your business. Here are just a few examples.
Management buyout
A management buyout is where your existing management team buys all or some of the business. This route can be advantageous as the buyers will already know how the business runs and are likely more than capable.
Management buy-in
Similar to a management buyout, a buy-in will involve an external manager or team buying all (or the controlling stake) of the business. They won’t have the same level of familiarity as an internal team, but they’ll almost definitely have the relevant experience to keep things afloat.
Employee buyout
If you want to secure a future for your employees or reward their loyalty, you can always sell your business to your team. This could involve direct ownership (when employees own shares directly) or indirect (when shares are held in a trust on behalf of the employees).
Acquisition or trade sale
An acquisition is when a company buys all or the majority of another and starts controlling it. As an owner, it’s a lucrative exit strategy and an easy succession plan.
Passing on to a family member
We’re all aware of how protective you can be over a business, especially if it has been passed down through generations of family. It’s entirely understandable if you wish to continue the tradition. Obviously, you’ll still have to train them to meet your role’s expectations, but hopefully, you can trust them to keep the good name going.
We can help you put plans in place
Passing your business on to someone else can take time and effort. You’ll want to choose the best person for the job to maintain your reputation. That’s why getting a head start on your succession plan is a must.
We can help guide you through the process and act as a sounding board for your plan. Get in touch today to discuss your succession plan.
