Business Succession Planning
How to create a business that can run without you
Succession planning enables you to exit your business; whether through retirement or sale. For many people this is the opportunity to realise their life’s work; the process injects a huge amount of energy and value into companies.
26% of UK business would fail if one key person died or left
Too many businesses are not forward thinking; if the unimaginable happened these companies could not continue to trade. Likewise, many people looking to exit their business are unable to because they are an integral part of it.
Why? Because their key person risk is too high.
The purpose of this article is to enable you, the reader, to build a business that will survive without you. Through implementing a succession plan you are able to choose the moment when you want to step away.
Put another way, we will explore how to remove key person risk.
The Business cannot Survive without you
We know from experience that businesses without a plan hit the second brick wall and grind to a halt. In this context that means the owners are simply unable to step away from the company; without them there is no business.
Many business owners are stuck in a mindset of having to not being able to step away from the business and trust other people; they have no hope of moving forward. In this mindset they cannot develop a succession plan and there is a sense of defeat. The company cannot be sold because it’s not worth anything without you; this makes you feel disillusioned, question what you are doing and also creates enormous pressure.
Opening up about a business is a very personal conversation, with a coaching approach you can begin to clarify your vision. From here you can create a strategy that aligns to it; by linking the two you are able to start letting go.
Selling the Family Bakery
There is a bakery business in my family; it is now a third-generation business and has been established almost 100 years.
There is a desire to sell but one member of the family is so integral to the day to day trading – both in terms of operational activity and knowledge – that without her the business is very likely to fail.
We have had numerous conversations about what it would mean to realise a sale, one of the biggest blockers is emotional attachment. She would like it to stay in the family and currently cannot accept the idea it may not.
We cannot create a succession plan overnight but by having the conversations and taking small steps she is now slowly moving out of daily operations and the bakery is becoming less reliant on here. The emotional connection remains but gradually the bakery is learning to run without her. Therefore, when the time comes to let go, she will have a business to sell. The bi-product of this is renewed vigour and enthusiasm which is hugely beneficial to the business.
How do we Create Breathing Space?
The key benefit of creating a succession plan is that it enables your business to run without you. Succession planning enables a company to move forwards and evolve without you. You may have a desire to pass the business on to future generations or new leadership.
Step 1 – Acceptance
Ask yourself: what would happen if you left the business for 2 days…
Would it exist when you came back as you know it, or would it have gone into the ground?
Once a risk is acknowledged, you can take action to create a business that actually runs without your input. If you achieve this then you have in essence, created a succession plan, so how do we do this?
Step 2 – Functionality
We analyse the functional structure of the business; what does everyone in the business do? What are their roles and responsibilities?
Through analysing where you and the directors spend time, we can begin to shift tasks into other roles. This initial shift reduces your daily business activities, freeing up time to work on the business. Focusing on strategic work enables you to build a business model that will achieve your unique vision.
Step 3 – Management
A management team is required to provide shared responsibility and support; even if this is a tier below the you/the board it enables people to understand what is happening in the company and step in to provide planned cover. Through the creation of growth management systems, we ensure there is no central knowledge hub inside someone’s head, all information is available and documented. This process may not seem exciting and sexy but is in fact it completely necessary to ensure survival of the business
Step 4 – Business Skills
A key part of a succession plan will be identifying the skills your business requires to trade, evolve and grow. As an extension to functionality, this is the process where you begin to understand what people in your business really do and thereby create an efficient structure. Through identifying key skills, we can bridge gaps through learning and development to ensure that we are building an environment and a culture that nurtures people.
Step 5 – Culture
Companies with a good culture attract the best people, this enables these businesses to create a unique proposition that cannot be imitated. At a point of exit this unique culture becomes an asset that positively impacts the value of the company [see this article around value]. Creating pride around a purpose, means that people will want to work for you and with you.
It is always surprising how few businesses consider succession planning until they really need it. Depending on the complexity of the business, it can take 12 – 36 months to implement a succession plan. Should the worst happen, and you are forced to retire early or sell your company quickly. Your failure to plan will negatively impact your business and your personal life.
Take a moment to ask the question, “could my business survive without me?”