3 steps to a successful private company succession plan

Succession planning is a bit like estate planning - it’s something that needs to be done, but it’s not easily contemplated. For many private company business owners, planning for issues surrounding their death is not a lot worse than planning for someone to take over their business. This is particularly true for first generation owners who have created and grown their business from infancy. In fact, for some it may seem like a fate worse than death. Unfortunately, no one is immortal, and with the proper planning you can preserve a strong legacy for future generations.

Generally, the minimum requirement for planning for a leadership transition is five years. This gives you ample time to identify candidates, train them in the various disciplines of the business, and affirm your choice. However, if there are false starts, five years may not be a sufficient time frame to begin planning for a qualified successor (which is why we recommend beginning the process even sooner).

Step 1: Identify Your Candidates

Identifying qualified candidates is the important first step. If your business is family-owned, is there a family member with the capabilities and an interest in running the company? It is critically important that this not be a forced process, either by obligating a family member or by allowing an under-qualified family member to force their will on the family. Qualified candidates will not only need to perform their current position at a very high level, but they will also need to demonstrate leadership ability, sound judgment, and business acumen. If there is no one in the business with these qualifications today, then you’ll either need to make the investment to develop these qualities in your existing talent or begin a search externally.

Step 2: Train Your Candidates

Training qualified candidates in various aspects of the business can be easier said than done, but it is a critical step in the process. If a great sales guy is a candidate, then you need a plan to get him exposure to operations and finance. The hard part is finding the requisite time away from current duties to get sufficient exposure to the other aspects of the business. This step requires some sacrifice by everyone involved, but if the great sales guy does not understand the processes and costs involved in making the products or what drives the company’s profitability, then he may not have the necessary qualifications to ultimately lead the company.

Step 3: Affirm Your Decision

Hopefully, at the end of the process you have at least one qualified candidate to lead your company forward. Sometimes there are false starts as circumstances change, the business changes, qualified candidates take another opportunity, or candidates ultimately demonstrate they just don’t quite measure up. That's why the sooner succession issues can be addressed, the better. It’s also a good reason to consider grooming several potential candidates at the same time.

Contact us at 215.441.4600 or Email if you have questions or would like to discuss how this topic may impact your business.

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