Succession Planning Checklist for Business Owners

succession planning checklistSuccession planning is vital for ensuring the future success of your business. For some business owners, this means passing the business on to the next generation. For others, it may mean selling an interest to management or replacing a co-owner.

Unfortunately, many business owners delay succession planning until it is too late.

Succession planning does not mean that you are giving up on the business or that you are ready to hand over the reins. The planning process means that you are invested in the future of your business and that you want it to continue to thrive or provide income once you have exited your role as the primary leader.  

A comprehensive succession plan can increase wealth, minimize taxes and establish a standard for the future. Follow the succession planning checklist below in order to best position your organization.

Step One: Hire a succession planning professional.

Succession planning is an integral part of ensuring your business not only continues but thrives. Because of this, it is important to involve a succession planning professional. A qualified advisor can evaluate the needs of your business, help create an actionable plan that will satisfy your personal and financial goals, facilitate the process among the stakeholders, and ensure that the plan evolves as needed.

Succession planning consultants are able to look at a business objectively in order to propose a practical plan that meets the business owner’s objectives while maximizing value and wealth. Additionally, experienced succession planners have the benefit of knowing who should be incorporated into the process to fully develop and vet the plan to ensure the plan is successful. 

Step Two: Outline a vision.

Before any planning can be done, it is important to know what you, as a business owner, want for the business’s future. A succession planning checklist is founded on the desires of the business owner. While this may seem easy on the surface, it is often difficult to know exactly what a business owner wants the future to look like. A qualified advisor knows what questions to ask and what scenarios to pose to help business owners outline their vision.

Step Three: Strategize.

The next step in the succession planning checklist is setting a strategic approach that will ultimately get the business to achieve the vision. This forward thinking requires business owners and stakeholders to consider what it will take to position the company to reach the predefined vision.

What types of internal structures or resources will need to be brought into the organization to accomplish these goals? It is important to analyze what has worked in the past in order to define the future. Succession planners aid in these discussions as well as provide insight and an informed perspective to aid in building a strategic plan.

Step Four: Identify key roles within the organization.

Succession planning should not be limited to just you or your senior management. Employees at all roles within the organization play an integral part in working towards the company’s success. There are likely many roles within the organization that have a significant impact on the company’s ultimate plan.

It is important to identify these roles and to detail what qualities a person would need to be able to achieve success in the position. Understanding the specific needs of each key role allows implementation of the plan. Your succession planning advisor can assist with the identification process and provide insight on roles that may be overlooked or undervalued.

Step Five: Create a plan to mentor, train and develop high performers.

Promoting from within is one of the most important aspects of a succession planning checklist. Not only does promoting from within increase morale, but it also ensures that knowledge and experience stay within an organization.

Two things must occur for this to happen:

  • Establish an evaluation process. The organization must create a way to evaluate talent. Succession planners will help to build a template that will evaluate current employees on their skills and potential for growth. A talent matrix is especially suited for this task. Completing this process gives the management team the ability to see which individuals in the organization are poised to take on more and to be leaders in the future.
  • Implement a development process. There must be a pipeline to develop those individuals who show potential. While on-the-job experience facilitates growth, it is not enough. Successful succession planers will help to design a program where strong candidates are provided with mentorship, training and development in order to prepare them for the next step in their career.

Step Six: Establish a plan for selecting external vs. internal candidates.

While promoting from within is great for morale and retaining knowledge, it is not always a feasible means of filling a position. The question becomes, where is the line between brining in an external candidate versus developing someone internally? 

For some organization, expected time to get up-to-speed is a large factor. Other organizations will be looking for particular areas of experience. A succession planner can help your organization determine when an external candidate should be brought in, as well as, what qualities are needed to bring in someone from the outside. This is important for both front line and senior management positions.

Step Seven: Continually review and update your succession plan.

A business’s succession plan should be a living document. As your personal situation and the business changes and grows, the succession plan should change and grow as well. Changes in business strategy, market conditions and the industry as a whole can significantly impact a succession plan. Regularly reviewing the succession plan ensures that in the event of a disaster, the business is fully prepared to react. Your succession planner can help to determine the frequency of the reviews and the key stakeholders that should participate in the review process.