Whether you are thinking of selling your business or passing it on to family members or employees, succession planning can determine whether the business continues to succeed or disintegrate under new leadership.
Some family business studies estimate that only 30 percent survive in the transition from first to second generation ownership, according to Inc.com. If you want your company to live longer, succession training is very important. This is how you properly plan the future of your business.
Choose wisely the successor
When choosing a buyer or successor, it’s important that you find someone who is not only competent, but who you trust to be responsible and continue the corporate culture.
“You want to feel it, for the most part, you have a shared value system,” said David Scarola, director of business coaching experience and consulting firm The Alternative Board.
Too often, Scarola says, homeowners make hasty decisions and find that, after leaving the corporate culture, they have changed and their employees are no longer happy.
If you are transferring business to family or employees, make sure you want it. Scarola recommends a conversation at the beginning: the business owner might think that a boy, niece or other family member wants to run his business, but the reality may be that he is not interested in doing so. The initial conversation can save you from trouble and sadness to prepare someone for the responsibilities he does not want, Scarola says.
Train early and document your process
The next important step in an exit strategy is to make sure your process is organized and well documented. This is important for any business, because in an emergency, you want your employees to continue, it is very important for someone in charge of this business to have a clear path forward .When you build something from scratch, you think your process is intuitive because you’ve been doing it for 20 years, but sometimes, even the basics, like a treatment program, are not clear.
If you train a replacement from within, it’s never too early to start, “said Scarola. He recommends starting with a simple task and delegated, even before beginning to discuss the possibility of people in control. This can give you an idea of how well this person can do it in this role. However, Scarola warned against telling employees about succession too soon.
“Give them more authority to make decisions from time to time,” Scarola told Business News Daily. “The key turning point, where you really start to let go, is when you let them take a decision you have not taken, but you allow them to make that decision.”
There are several steps you can take to train your successor, including showing where everything is filed, asking your intern to chase you at meetings, and let him make a decision while there, according to the University Checklist from Newcastle in the UK.
Get the document in sequence
In addition to having all the processes documented, it is important to have legal aspects of your business in order, says Scarola. “Often, the only equity the entrepreneur possesses is the business itself,” he said. “Consult an attorney specializing in property transfer.”
If you move a family business to another family member, Scarola gradually recommends the release of the property, for example, by increasing the participation of that person in the company. In “Family Business Succession: Big Test of Greatness” (Business Owner Resources, 2003), authors Craig E. Aronoff, Stephen L. McClure and John L. Ward suggest to prepare some succession documents:
A strategic business plan that illustrates the company’s future routes, with the forecasts of each generation making changes as needed. The mission statement of the family, which is very useful when some members have a company because it helps determine the role, culture and direction