Succession planning is not always top of mind for small businesses and family-owned operations caught up in day-to-day operational issues and chasing new business. But, a large percentage of businesses do not survive the move from founder to next generation because subjects such as retirement, death or illness aren’t spoken about. Identifying and mentoring talent should form part of any business strategy to ensure the longevity and future success of the enterprise.
Deciding who to hand the baton over to requires careful planning as the legacy of your family-owned business is at stake. Here are four tips to consider when making succession plans:
Define your objectives
Make sure you have a clear picture of what you want the business to look like in the medium to long term. This will help you to assess what skills are needed to achieve these goals.
Next, identify the type of person you see as best suited to take over. Should it be someone with a similar management style to your own? Do they fit the culture of the business? Will they be an asset to the business, furthering its goals and boosting growth? Are they the best person to direct the company towards management’s vision for the future in the medium to long-term?
Astute business owners understand the importance of identifying talent within the organisation and grooming them to fulfil more complex roles in the future. The sooner this process starts, the quicker they will be to step into a more senior position.
Don’t rely on keeping the business in the family
Many business owners dream of keeping the business in the family, hoping their children or grandchildren will be chomping at the bit to take over the reins. But, this is often not the case. And, even if family members are keen to steer the ship, they may not share the passion, drive or expertise needed to make it a success. So, set any aside romantic notions of building an empire, and be objective and strategic when choosing a successor.
Discuss your plans with family members and involve them in the succession process. Not doing so, will only sow discord and inflame resentments. The succession process should be discussed with family members regardless of whether they are expected to take over or not.
Don’t put all your eggs in one basket
So, the perfect person has been identified for the job. A lot of time, effort and resources have gone into developing and mentoring the individual. But, then they leave for greener pastures. From happily contemplating retirement, you now have to put everything on hold to find another suitable candidate. To avoid this eventuality, identify several potential leaders and nurture them all.
Plan ahead, review regularly
Ideally, succession planning should start once you’ve pass the start-up phase and the business is established. By this stage, the business’ vision, culture and values should be well entrenched, making it easier to identify potential candidates for the top job.
Review your succession plan on a regular basis to make sure you’ve made the right choice. If potential successors are not living up to expectations, they may need additional training and mentorship, or you may need to find other candidates. Much like your business plan, your succession plan should be a “living” document that changes as the business does.
There is a popular adage often attributed to Benjamin Franklin, the father of time management: “Failing to plan is planning to fail.” Following the above tips provide a good baseline for succession planning in any family-owned business. Don’t be caught unprepared!
Ryan Roux and Ivy Gura are BDO Audit Seniors. BDO in South Africa is the South African member firm of BDO International. The global BDO network provides audit, tax and advisory services in 158 countries, with over 64 300 people working out of 1400 offices worldwide. Visit: www.bdo.co.za