Succession planning is something seldom thought about by small business owners. In fact a recent survey conducted by Insights West, on behalf of Small Business BC found that less than one-quarter of small business owners currently have a succession plan, while over one-third do not believe it is important.
As a small business owner, it’s hard to look too far into the future. There are so many day-to-day tasks and short-term goals to achieve, that thinking about passing on the reigns can seem a too far distant future. Your business is also probably one of your big loves (don’t tell your spouse). You don’t want to think about letting go of control and it moving on without you.
Why is Succession Planning Necessary?
You’re probably giving your life to building your business. You’re making sacrifices and throwing your all into making it work. But, what happens when it becomes time for you to retire or if something was to happen to you? Do you want the business to continue its commitment to your customers, your community, your suppliers?
Without a clear succession plan, many businesses fail after the owner retires, sells the business or passes away. Without a captain to steer the ship or a map to show the way, the business simply drifts until it hits an obstacle and sinks.
Early preparation will mean that you can take time to make the plan and build in the necessary steps to ensure an efficient transition from one owner or operator to the next, regardless of whether you are there to complete the steps.
When Should You Start Your Succession Plan?
It’s never too early to create a succession plan. Even if your plans to retire, step-down or sell the business are a far away dream, planning well ahead makes sense. After all, who knows what the future holds.
There’s actually a strong case for a succession plan to be built into your start-up business plan. If you know that your goal is to work in the company until you retire, or if you know you want to build the company for ten years and then sell it, you can build the systems and processes for the business around these goals.
How Much Does Succession Planning Cost?
The earlier you start your succession planning, the less painful the costs will be, as they will be spread over several years.
There are both internal and external costs when creating the plan and these will vary depending on your business structure.
- Internal Costs. This cost will mostly be your time and the time of your team, in addition to any administrative resources that you will need.
- External Costs. These are commonly lawyers and accountants. You may also use a broker if you’re planning to sell your company or a hiring consultant if you are looking for someone to come in and take your role as leader.
Your succession plan is a road map that guides the transition of your business upon your exit, whatever the reason. Like your business plan, it should be a living, breathing document, reviewed every six months to make sure that the content is still valid.