Many individuals who have spent their livelihoods building, running, and maintaining a successful business, often intend to pass on their accomplishments to a family member, close relative or trusted employee.
The process of succession planning is one all businesses will eventually face, and it will not come without its challenges and considerations.
What is succession planning?
Succession planning is the strategy used for identifying future leaders at a company and preparing it for all contingencies by developing high-potential workers capable of advancement.
Such planning requires rigorous preparation, well in advance of a planned retirement, transfer or sale, and judgement with the support of an experienced advisor that can assist owners along the way.
Below, we have listed some key considerations when it comes to succession planning:
Taking time to create a proactive plan
We recommend that businesses have short, medium and long-term plans in place for succession that include provisions for a sudden illness or death – something that has only become more relevant over the last year due to the Coronavirus pandemic.
Those who leave their planning to the last minute will often experience a negative impact on the progress and cost of succession, as well as their ability to structure the transfer of control in a tax-efficient manner.
Pin-pointing training and qualifications
Our experts advise that businesses hand over their company to experienced and qualified individuals, whether they are inside of the owner’s family or not.
Therefore, we suggest advising business owners to treat a family member as any other employee, ensuring they have the skills and passion to lead the businesses when they are gone.
There should be time invested in candidates’ training where necessary or support for them to gain experience elsewhere first, including time spent within other companies and organisations.
Internal succession candidates
Sometimes business owners fail to spot ideal candidates right in front of them, for example, senior managers or employees suited to potentially running the company.
While the obvious successor to the role may be someone immediately next in line or a close relative, we advise not discounting other promising candidates and rather look for those who display the skills necessary to thrive in high positions – regardless of their current title or relation.
To find out more on succession planning, please get in touch today.