Five Steps To A Great Transition And Succession Plan

It’s the responsibility of every business owner to plan for the day when he will no longer be involved in his business.  The plan is the process – the sale of the business is the objective.  It’s not uncommon for the owner to avoid the process, instead waiting for the objective to occur so he can sign the purchase and sale agreement with a new owner and move on to his retirement – also unplanned and ill defined.

To some business owners it’s easier to let their business grow on its own – without a focused growth and management strategy.  When it comes time to sell, the business is valued lower – consistent with that lack of focus.  The owner gets what she accepts.

We all have opportunities to achieve our dream, our goals, and our vision – whether we choose to achieve these opportunities on a formal or informal basis.  As one owner told me recently – “I knew I should have planned my exit better but I felt I did not know enough about the process to do it right.”

Developing and implementing a successful business transition and succession plan involves:

  1. defining the owner’s role in the business during the succession process,
  2. developing a focused marketing and sales strategy,
  3. developing an effective workforce alignment strategy,
  4. developing a financial plan for the owner’s retirement, and
  5. developing a specific, actionable plan that will guide the business through the transition process.

Three questions should be asked by ownership and management:

  1. Who is the appropriate person to take over the owner’s responsibilities?
  2. When is the appropriate time for them to assume those responsibilities?
  3. And how will that changeover be implemented?

Business Plan

Let’s look at the business plan first.  An actionable business plan charts a course for the firm.  It involves setting a vision with a specific time frame and revenue objective; establishing a series of strategies to achieve the vision and goals; establishing annual objectives that seek balance within the business so that goals are achieved, employees are engaged, processes are fine-tuned, and customer needs are anticipated and met; and establishing action steps to implement strategies and achieve objectives.

Marketing And Sales Strategy

A central element to the plan is a focused marketing and sales process to increase financial value within the company over a specific time frame.  A focused marketing strategy should include identification of target markets and market segments, a pricing, promotion, and distribution strategy, and marketing programs.  The sales strategy should incorporate a reliable sales forecast and specific sales programs.

Workforce Alignment Strategy

Developing an effective workforce alignment strategy requires development of practices to hire the rights types of people who are being managed in the right places at the right times and being motivated to do the right things right.  Hiring for a person-future fit focuses on the potential long-term contribution of applicants.  Managing smart is supported by the development of formal processes and procedures and the development of professional standards; and developing a family – like community helps develop an effective motivational climate.

The owner’s role in the exit process requires balancing several dynamics.  First, a succession process should focus upon easing the owner’s concerns about transferring the firm to another person or persons.  Review of the corporate structure may indicate a need to form a board of advisors or board of directors for feedback and advice.  Review of systems and procedures may indicate a need to upgrade and automate.

Management Competency Assessment

Next, it may be appropriate to conduct a management competency assessment of the designated successors to identify training requirements as well as organizational support necessary to ensure successful implementation of the business plan.  Many owners don’t want to let go of the company out of concern that their successors are not prepared. Successors may sense this reluctance and plan an alternative career. If, however, the successor sees a plan in place that outlines the succession process, she may be more apt to continue in the business.

Leaving a job after working 30 or more years, 50 or more hours a week to a life of retirement sounds enticing – until the owner realizes she won’t have much to do every day.  Certainty is replaced by uncertainty and self-direction drops, her role awareness suffers, she is now “insignificant” and she feels adrift, without a connection to her career anymore.  Developing a transitional coaching plan and strategy to assist her to recover her certainty, significance, and connection in her new career is central to helping her develop that career.

Financial Planning

Finally, developing a financial plan for retirement is essential to ensure financial security after the succession process is complete.  The planning process involves financial planning and estate planning so that he can minimize tax obligations, clearly identify estate issues, and identify investment practices that will provide stable income during his retirement.

There are a number of disciplines and activities involved in the succession planning process – business evaluation, management coaching and training, business planning, marketing and sales planning, transitional coaching, financial, business, and estate planning.

If she is not convinced she should go through a succession planning process, here are several questions to ask:

  • Does anyone else really want this business?
  • Can the business survive without me?
  • Have I planned personally for a change in role?
  • Have I properly planned for my retirement and lifestyle needs?

Depending on your answers you may decide you want to start the process before you achieve your objective.  Good planning yields good results.  You get what you accept.

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