When you’re busy running your business day to day, the last thing on your mind is likely who’ll be operating it down the road. And you’re not alone. In fact, a survey from InterSearch shows that only 17 percent of small companies have a succession plan.
And being “busy” isn’t the only reason many haven’t gotten around to it. A healthy fear of the unknown and the daunting task of narrowing your choice down to one individual can make the succession planning process feel overwhelming. But there are things you can to do make it easier and avoid the most common mistakes.
Mistake 1: Not having a plan.
As cliché as it sounds, failing to plan is planning to fail—especially when it comes to something this important. The succession planning process requires the same kind of focus and attention that you’ve used to make your business succeed and grow. And it involves figuring out both what you need and want from your business in the future. For example, will you need income for your family? How involved will you want to be? Be as detailed as you can when creating your plan, while still bearing in mind that it may need to be somewhat flexible, as it could require revisiting down the road.
Mistake 2: Creating unhealthy competition.
The idea of several people vying to be your successor can sound like a good one. They’ll all be working hard for your business to prove they’re the best person for the job, right? But not managing the process properly can lead to problems (not to mention damaged relationships). One of the best things you can do is to be open about the process with your potential successors and set clear expectations for your plan. You’ll also want to level the playing field where possible, ensuring everyone being considered gets the same opportunities to receive critical mentoring, as well as tackle projects that allow their capabilities to shine.
Mistake 3: Not focusing on the future.
The succession planning process should always have an eye toward where you and your business are heading. Sure, there may be that one potential successor you really click with or the one who reminds you of yourself early in your career. But think about your goals and your company’s needs—not just for now, but down the road. You might not actually want a “mini-me.” Be honest: Are there areas where you wish you had more knowledge or expertise? What skills would you want in a successor that match yours and exceed them? That’s where you want to aim.
Mistake 4: Not understanding the rules (and the tools).
Just as with any complex business undertaking, there are defined financial rules and regulations that will need to be included in your succession planning process, so it may make sense to seek out experienced advisors to help with legal and tax issues. And a financial advisor can help you navigate other monetary complexities, from buy/sell agreements to gifting shares to establishing trusts and stock ownership plans. Mastering the rules and the tools necessary to help you implement your plan will ensure you’re setting your replacement (and your business) up for long-term success.
To learn more about succeeding at succession planning, download our succession planning ebook: “5 Steps to Help Your Company Run Itself.”
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