Succession Planning: 3 Ways to Sustain Business Longevity After Exit
Succession Planning Best Practices: Three Ways to Sustain Your Business’s Longevity After Your Exit
There are many considerations that contribute to the longevity of a business: great leadership and culture, innovative product development, efficient processes, financial discipline, and stellar customer service are all important factors. But what can you do as an entrepreneur to increase the chances that your business will thrive under new ownership if you were to transition your business to new leadership or have a business exit? If you have been unsure how to start the succession planning process, read on to obtain three best practices for success:
Begin by Focusing on Three Succession Planning Best Practices:
- Minimize and then eliminate your business’s operational dependence on you.
- Put your business in the hands of a successor with entrepreneurial vision.
- Sever your company’s financial dependence on you.
Minimize and Eliminate Operational Dependence on You
There’s no doubt that much of the credit for the success of your business goes to you. However, as you begin business succession planning your task is to minimize your role in your company’s future success. To do so, consider building a management team that is capable of running your business on a day-to-day basis. A team is best to put in place versus one individual so that you can have multiple business successor options to step into your shoes when you are ready to exit your business. Once you have found and trained skilled managers, it is time for you to give your team room to test its wings: Take a vacation for several weeks or months. This may seem unimaginable, but if you return to find your business running as smoothly under your team’s leadership as it did under yours, you are on the road to creating a business that can outlast your leadership. If you find things in disarray, a little self-examination is in order: Did you select the right managers, and/or did you adequately train them to successfully run your business?
Ensure Your Business Successors Have the Right Vision
Entrepreneurs often talk about being in the right place at the right time with the right product or idea at the right price when discussing their reasons for success. Rarely do they give sufficient credit to their vision; a vision that they have tweaked, retooled, and/or reinvented as customer preferences, technology, the economy, or their industries changed. Unless your business successor(s) can respond to change as nimbly as you have and are able to see failure as an opportunity and have confidence, they are far less likely to enjoy your level of success.
Reduce Your Business’s Financial Dependence on You
The final, but no less important, task in positioning your business to thrive in the future is to shift the financial dependence from your wallet to a business successor’s. We separate this task from eliminating your company’s operational dependence on you because this task typically meets resistance by outside forces. How will the bank that has extended a line of credit to you for years or financed various loans (collateralized or uncollateralized) react when you ask them to trust the creditworthiness of a business successor and the stability of your business under new ownership? Transferring debt obligations and financial commitments is one of the hardest and last things to be transitioned when business successors are family members or employees because typically neither of these parties comes to the table with sufficient financial resources.
Path to Successful Succession Planning
By eliminating your business’s operational dependence, choosing successors with vision, and creating financial independence, your business will be on the road to success well beyond your exit. These are key best practices for effective business succession planning.
Learn more about business succession planning and how you can craft a successful business transfer.
About Elizabeth Ledoux
Elizabeth Ledoux is the founder of The Transition Strategists and serves as a Denver Chair for TIGER 21, the premier peer membership organization for high-net-worth entrepreneurs, investors, and executives. She is a thought leader and speaker on the topics of succession planning, navigating transitions for companies and leaders, family business, strategic growth, and the business journey. Elizabeth is the author of three books for business owners and entrepreneurs including her latest, It’s A Journey – The MUST-HAVE Roadmap to Successful Succession Planning.
