Preparing for your successor
Handing over a business that you created and built is a daunting prospect. It can be even more challenging if you are passing it down the family to a younger generation that will take the reins. To help with a smooth transition, here are our tips for preparing for your successor.
Identify who will be your successor
Ideally, you will already have a succession plan, so will have a clear direction to go in. However, if it’s a small business and you have just assumed your son or daughter will take it on, then now might be the time to give it some more serious thought.
Do you have more that one family member working in the business and therefore are hoping they will run it as a team? Or if you have one person in mind to be the head of the company, how will that impact the others?
Perhaps your successor doesn’t work in the business at all currently, but you are hoping they will return to take over when you retire.
Identify who your ideal successor would be and discuss your thoughts with the relevant members of your company. However, don’t forget to also speak to the individual concerned. You might discover that Mike doesn’t want to run the business and enjoys the role he currently has, whereas Sarah is just finishing her business degree and would relish being the CEO of the family company.
It can be a long-winded process, especially where relatives are involved, so the sooner you start conversations, the better.
Have a job description
Ensure that you are clear about what your role entails and have a current job description that accurately reflects it. This will help you identify what skills your successor needs and also give them some clarity around what is expected when they step up.
Start training now
It’s never to early to start training someone for their next role. While you may be hoping to hand over the business so you can happily retire, you also need to consider that your succession plan may have to be implemented in more unexpected circumstances.
If you became ill or died suddenly, having a successor that is already primed for your role will make it much easier for the business to carry on trading.
Consider having your successor start to shadow you in your role, attending key meetings and being involved in decision making.
Create a plan
The transition can take several years, over which you can reduce your involvement and let your successor start to take on more responsibility. This will help to limit any disturbance to the business and allow time for staff to adjust to the new circumstances.
Create a plan now so that everyone is clear what the coming years will look like and when you will finally exit the business.
Let them take the reins
The added benefit of transitioning over a more extended period is that your successor will still have you around to ask questions to, get advice and find their feet while still being able to access support. They will probably have a lot of queries and adjusting to their new role will be challenging, your presence during this time is invaluable.
As you get closer to exiting the business or want to start decreasing your involvement in the day to day issues, let your successor start taking on some of your duties. Empower them to start living their new role, increasing their responsibilities over time. Work together as a team so that when the time comes, they will be able to take over from you seamlessly.
They are not you
Remember, whoever you pass the business on to, they are not you. They may have a completely different way of dealing with things, they may be more forthright than you or more willing to listen to employee’s opinions.
As long as their behaviour is not detrimental to the business, then you will have to accept that they will have their own way of handling things. Bear in mind that it will be a learning curve for them, and their style may develop over time. They will make mistakes and implement changes as a result.
Hopefully, you chose them to run the business because you felt that they could successfully lead the company over the coming years, and that may require a different approach than you have taken up to now.
Listen to new ideas
Often a younger generation has lots of ideas for ways in which to grow the business or bring it up to speed with the modern world. Try not to get defensive when they come to you with these thoughts. Listen to what they have to say and help them to look at the ideas they have as a business owner and what aspects need to be considered, such as finances, marketing etc.
While you may find new technology baffling, they may have discovered a solution that could revolutionise your small enterprise, so keep an open mind.
Don’t keep checking up on them
While it is tempting to check in with your successor often, especially when they start taking on more responsibility, try not to overdo it. Give them space to find their place in the company and establish their own relationships with colleagues, employees and suppliers.
You may want to set a specific time to meet, perhaps every few weeks or monthly, where you can catch up and run through any concerns. This way, both of you know that there is an opportunity to have a debrief and seek support while maintaining autonomy.
The key to a successful transition is communication between all parties. Being clear about the process and what is going to happen will minimise disruption to day to day operations and allow for the process to run more smoothly.
If you are considering handing your business on to the next generation and would like to discuss your concerns or run through your plans for peace of mind, then we offer a complimentary 30 minute consultation. There is no obligation to sign up for anything further, and our Life Centred Business Planners would be happy to talk to you about any aspect of your business that you need support with. Contact us today and find out how we can help you create a brighter future for your enterprise.
If you found this information useful, you may also want to check out the following:
- Director responsibilities for limited companies
- Employing your child during the university summer break
- 8 financial figures all business owners should know
MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, taxation, debt management, savings and investments, lifestyle planning and much more.
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