How To Establish a Succession Plan for Your Business

Times of transition can be expected or sudden. Either way it’s important for your business to have a succession plan in place for when the moment comes. 

What is a succession plan?

Answered simply, a succession plan covers who will fill leadership positions when the time comes for retirement. But a properly built succession plan is much more than that. It requires carefully analyzing your business’s entire organizational structure and how that structure may need to shift in the future.

With this clear understanding of their organization, businesses create succession plans to outline the best course of action in times of leadership change. If a gap opens, what will be the path to filling it? How do we utilize the talent on hand, improving upon the structures in place, rather than just plugging a hole? How can we start preparing for those possibilities now?

When do you need a succession plan? 

In theory, you need a succession plan when someone in a key position decides to step down. Many businesses prepare for this 10 years in advance. In reality, you need one now. No one can predict potential unforeseen circumstances that may force changes to your organizational structure. Developing a plan as soon as possible ensures you’re prepared. 

Incorporating organizational development

The best succession plans draw from a wide array of talent — people the company has invested in and who are invested in the company. These talent pipelines are products of purposeful team development at every level. Smart companies will incorporate professional development into their succession plan to set their businesses up for success in this way. 

By investing in employees and showing them real opportunities for growth, businesses also retain top talent. Hiring practices should take succession planning into consideration, as well, by looking to fill in any gaps. You may be hiring someone for one position, but what role could they play down the road? 

Where to start

You can’t make a plan until you know what resources you have. Gather data through company-wide assessments. Learn as much as you can about structures, processes, and individuals.

As part of your preliminary research, ask these questions:

• What is the daily impact of each position? 
• What type of person is best for each leadership role? 
• Who has the skills and knowledge to enact our five-year plan? 
• What training could help potential candidates hone next-level skills? 

Tips for succession planning 

When succession planning gets stressful, remember these tips to stay on track.

• Get started. Even if it feels daunting, the best step you can take is getting started. Set a goal and take small steps toward it each month.
• Encourage honest conversation. It’s important for high level executives to be open about their wishes for the future. What role do they want to continue to play in the company, if any? If you’ve identified a successor, make sure they’re interested in the same long-term commitment.
• Pass knowledge along. Come up with a plan as to how senior management can share all they know before departing. Begin that process now, especially through mentor-mentee relationships. 
• Consider your options. The best plan isn’t always to promote someone into the exact same role. Step outside the obvious path to explore all succession possibilities. There may be an opportunity for restructuring that better capitalizes on your resources. 
• Accept change. Go into succession planning knowing it may be difficult to keep your business in the family and that significant change may be necessary for success.

Succession plan with a pro 

Apart from your own team, a financial professional experienced in succession planning is your greatest ally. Finding someone you trust with firsthand know-how helping businesses plan for their futures will ensure you’re headed toward success. Additionally, a third-party consultant provides an outside perspective often necessary when dealing with the personal emotions around your business.

Over the years, SME CPAs has assisted generations of business owners in succession planning. 

You can rely on SME CPAs to:

• Fully assist in individual and family succession services. 
• Develop a process for handling business and family matters. 
• Advise on family limited partnerships.
• Mediate disputes.
• Conduct SWOT analysis.
• Support through any mergers, business acquisitions, or sales.
• Adapt your plan as your business grows and changes.

Contact SME CPAs today to get started on building a succession plan for your business. With years of experience behind us, we can help prepare your business for a successful future, whatever comes your way.