More than likely your business is highly dependent on you. Perhaps it’s your skills or your drive and ambition that make your business a success. But now you’re coming up to retirement age or maybe you’re thinking of leaving the business for different reasons. How can you smoothly exit your business?
The answer is to plan carefully. This is often called succession planning.
What is succession planning?
It’s a plan to determine and develop the person(s) who will take over from you in running the business.
What are your options?
Your options can usually be boiled down to:
- Passing it to children or other family members
- Passing it to existing management
- Appointing a new manager who will ultimately take your place
Certainly the amount of options you have reduce the longer you leave things. For instance, if you hope to pass control to children or existing management then they need to be groomed for the role. This will take years, not weeks or months.
How long beforehand should you start to plan?
You should be planning right now. Since you never know when an unexpected event might happen, you should always have a plan in place that allows you to exit the business and still achieve some kind of reward.
For a planned exit, then you would need to be planning from a couple of years out.
How to start your plan
Begin by writing a specification list of your job. Include what you do, what you’re responsible for and the qualities needed to do your job.
Now think about what the leader of your business will need in the future. Is it exactly the same as you or should there be some adjustment? Times change and as businesses grow they move on. The qualities needed to start a business are not necessarily the same as are needed to run an established business.
Adjust your specification list once you’ve considered this.
Now consider your possible successors. Look at their experience and qualifications. Consider what skills they have or what their previous jobs have prepared them for.
Match this up against the job specification you’ve drawn up. Who are the good matches? It’s important to be objective about this, especially when considering family members.
Choosing your successor
Once you’ve identified who has – or almost has – the right skills and experience you need to evaluate their feelings. Are they committed to your business? Would they want to develop it further?
You know what running your business costs you in terms of desire and effort. Do they have the passion to go through the low points and stick with the business?
Attitude can often be more important than skills. Skills can be learned, but attitude can be difficult to change.
You need to recognise the consequences of raising expectations in any potential successor you’re considering. If you tell someone they’re being considered – however carefully you word it – and then you don’t appoint them they will inevitably be disappointed. And this may result in them leaving your business.
The choice may be obvious. Sometimes, though, it will become clear that there is no one – either family member or currently in your business – with the right attributes to succeed you. In which case, you would need to look at hiring someone from outside.
Developing your successor
Once you have chosen your successor then start to consider what they will need to be able to take over.
For instance, would some additional training be helpful? Would a period of mentoring help? Have you introduced them to important customers, suppliers and other contacts?
Then when it comes to exiting you could plan this in stages.
Perhaps firstly, you would hand over your day-to-day responsibilities, but stay onboard as a consultant. Your successor may appreciate the extra reassurance they would get from your being around to help with big decisions.
You could also continue to be a link with customers and suppliers as they gradually get used to dealing with your successor.
Just be careful though that you don’t stay too long. What might be helpful initially could soon be seen as interfering.
Letting go is hard, but if you’ve carefully planned the process you can feel confident in your choice and enjoy a smooth exit.