Published on October 1st, 2020 | by Luke Fitzpatrick0
COVID-19: Succession Planning For Small Businesses
For family business owners, it is always a good idea to develop a business succession plan in the case of an unexpected death, workplace injury, or illness. Having a business succession plan is much like having a will. It allows you to pass your business down to a family member when you leave.
By having a succession plan in place, you ensure that your business continues operating in good hands and helps to prevent any mismanagement or conflict that may arise in the event of unexpected change.
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Without a well-drafted business succession plan, you run the risk of your business failing or developing a negative workplace culture in your absence. Keep your reputation intact and protect your client’s by realistically thinking about what should happen to your business in the event of your passing.
What is a succession plan?
When it comes time for you to leave your business, a succession plan will ensure that your business will be transferred to the successor of your choice.
Much like planning a personal will, a succession plan allows you to identify the employees that will most successfully fill the industry roles and professions of your organization and keep it running long after you’re gone.
For family businesses, identifying your successor can help to ensure business continuity and growth and minimize any chance of internal conflict or confusion among existing employees. You should already have a shareholders’ agreement in place, which is used as a tool for succession planning. If not, a shareholders’ agreement or deed of the partnership will also need to be drafted.
The goal of succession planning is to mitigate risk, minimize downtime, and ensure the continuity of your business even after changing hands. Other benefits of a succession plan include:
- Keeps the peace: With a devised succession plan, your employees and family members are all clearly aware of their roles and responsibilities.
- Ensures retention: With clear management and leadership in place after you’ve departed, existing employees will not feel the need to ‘jump ship’ in search of something better.
- Maintains client loyalty and trust: If your business fails to meet their expectations once you have left, your clients may become disenchanted and seek their business elsewhere.
What to consider when drafting a succession plan?
A good business succession plan will consider what would happen if the owner of the business can no longer actively contribute in the event of death, illness, or injury.
As a business owner, your succession planning will help you to successfully transfer your business to your successor. Therefore, the following steps should be made in order to safeguard your business and those left to inherit it.
- Choose a successor
- Determine whether you’ll be selling your business or gifting it
- Consider operational and financial issues such as training programs you may provide for your successor, the market value of your business, articulating the changing dynamics to your successor, and talking openly about plans for the future of your business
- Create a timeline to make your succession plan more achievable
- Involved a skilled lawyer or solicitor to help put your succession plan into place
If you have successfully drafted your succession plan and met with an expert to discuss any details or complexities, it is time for the final handover. If your business succession plan is concise and current, then you’re increasing the chances of a smooth transition from owner to successor once you’re gone.
Setting up a clear pathway for your family members or employees allows them to be prepared once management changes. A succession plan increases the likelihood of your business remaining successful and experiencing growth even after you’re gone.
Integrating any future operational plans or traineeship programs within your succession plan can assist your successor in stepping into their new role with confidence and ease. It’s wise to revisit your succession plan regularly and make any updates, particularly if your business experiences high turnover or frequent internal role changes.
By grooming existing employees to prepare for the future, you are allowing them to become more capable of dealing with changes if a disaster were to strike.