Giving a talk about succession the other day, I started off by asking attendees, “How many of you are thinking about retiring or selling your business?” Not a single hand went up. That may be because no one wanted to show their cards to possible competitors in the room. It could also be because too many of us don’t think about succession in advance. After all, we love our businesses; that’s why we run them. We’re not comfortable with the idea of stepping away and turning our responsibilities, our vision and mission, and our legacy over to someone else.
In my experience of more than 25 years running businesses and coaching thousands of businesses across hundreds of industries, one of the best ways we show that we love and respect our businesses and want them to succeed is by planning for a time when we won’t be there to run them.
If this sounds a little like a parent preparing a child to go off on their own into adulthood, it is. There’s a similar mix of emotions, and the same inevitability. Whether you feel ready to start planning for succession or not, time marches on; the season will come when you need to pass the reins for one reason or another. If you’ve prepared for that day by taking these 7 Steps, you and your business will be ready, things will go smoothly, and you will transition to the next phase in your life with confidence and excitement.
(Not convinced? Please read my blog Are You Gambling with the Life of Your Business? In it, I share a story about how life doesn’t always work the way we want it to, and why it’s so important to be prepared.)
Succession Plan Step 1. Determine how you want to transition out of the business.
There are two main options here:
- 1. Transitioning to another leader. This could be someone internal, like a family member, another leader in the organization or a team member who has potential. It might also be someone outside the business. For more on identifying an individual who would make a great successor, read my blog Do You Have a Wingman? Getting Your #2 to Think Like #1.
- 2. Selling your business. Whether you sell to an equity firm or even a competitor, getting assistance from someone like a business broker is key. They have the expertise to ensure you get a great price for your business—probably a better price than you could get on your own. They can also safeguard you from getting tripped up by a bad contract.
Whichever option you choose, make sure the new leader or purchaser is enthusiastic about your company’s mission and committed to its values.
Succession Plan Step 2: Decide when you want to transition out of the business.
Your when will depend on a variety of factors, including how old you are, the stage of life you and your family are in, the stage your business is in, and your desire to keep working or go ahead and retire. A short-term when might be 3 years; that gives you plenty of time to be thoughtful about the transition and ensure your next leader or owner is ready to take over. If your horizon is 5 to 10 years, it’s not too early to start working on a succession plan; you’ll be that much more ready and confident when the time comes. Even if your transition when is “When I die,” having a succession plan in place—and developing a #2—helps protect your business against the inevitable times when life throws something unexpected at you.
Succession Plan Step 3: Think about what you want to do beyond your business.
This is a big one. You’re not likely to be motivated to follow through on your succession plan if you don’t have a plan for what you’ll do after. Ask yourself these questions, write down the answers, and consider talking with a close family member or friend about them:
- If I had all the time and money I needed, what would I do for fun? This could be hobbies, travel, activities with your family and friends, things you would like to learn.
- If I had all the time and money I needed, where and how would I be living? Describe your dream house: where it would be and the amenities it would include. List any other material possessions you might like, like a car, boat or plane.
- If I had all the time and money I needed,how would I give back? List organizations, charities and causes you want to be involved in, and what impact you’d like to have on your community and the world.
- If there is one thing I could do right now that I’ve always wanted to do,what would it be? This can be big like an international vacation or smaller like taking a painting class.
I put that last question in bold because it can be the one that really breaks things open for people. Maybe what you want to be able to do right now is meet your child or grandchild at the bus stop, or have a date night every week without worrying how work will interfere. Maybe it’s that you want to finally take that trip or learn to fly a plane or have a significant impact on a cause that’s important to you. Whatever it is that you want to do right now, planning for succession can make it happen.
By the way, you might find that thinking about what you want to do beyond your business makes you reconsider when you want to transition out of it. I love it when that happens, because it means that you’re excited about doing the great, fun, important things in life. Having a succession plan can help you accomplish it all: having a thriving, growing business and a thriving, amazing life.
Succession Plan Step 4: Position your business for a successful transition.
If your business is 100% dependent on you all of the time, transitioning to a new leader is going to be tricky. You need to wean your business—and yourself—off this dependence. It’s okay to start small. If you’re transitioning to a new leader within your business, ask yourself what is it that they do well that could also take something off your plate. Let them step up and do that. Then delegate the next thing, and the next. The point is to give yourself less to do while enabling your team to step up. It might be uncomfortable at first, but I bet you find that your team is equal to it; they might even surprise you by bringing fresh ideas and improvements to the way the business works, making everything better for everyone—customers included.
Succession Plan Step 5: Develop your leaders by teaching them what you know.
You’ve been doing what you do a long time, and you’re an expert in your industry and your specific business. That depth and breadth of knowledge and experience is what keeps a lot of people from even thinking about a succession plan: They can’t imagine how anyone could ever do their job as well as they can. The truth is that no one will ever do what you do exactly the same way you do. The next leader to take the helm is a different person with different strengths and interests. But by developing a succession plan, you can ensure they are prepared to carry the torch of your vision and champion your values.
There are four main components of knowledge and experience that you need to help your next leader master:
- 1. Vision, mission and values. Share your purpose and passion: why you do what you do, how you see what the business does as making a difference in the world. Share what you want your business to look like organizationally, financially and culturally. Share the values you want your business to project to your team, your customers and your community.
- 2. Business processes. Instruct your next leader on the step-by-step processes for bringing in business, getting the work done well, turning customers into raving fans, and hiring and training team members. Don’t forget to cover administrative and financial systems and processes.
- 3. Strategic planning. Involve your next leader in setting big picture goals, as well as breaking those large goals into smaller next steps or waypoints.
- 4. Leadership and mentorship. Show your next leader how to be a good mentor and how to manage employees.
Two important takeaways:
- 1. Don’t make assumptions about what someone does or does not understand or know, or even what they do or do not enjoy doing, even if they’ve been working with you a long time.
- 2. Be patient. It took you years to gain the knowledge and experience you have; it will take time for your next leader to learn, practice and get up to speed. The book Make the Noise Go Away: The Power of an Effective Second in Command by Larry G. Linne is a great resource.
Succession Plan Step 6: Start to enjoy your life now.
Remember in Step 3 when you were thinking about what you would like to do with your life beyond your business? And in Step 4 when you were letting your team step up and take some things off your plate? Now is the time to combine those by using some of that new free time and your newly empowered team to actually do some of those things with your life. Again, it’s okay to start small by taking one afternoon a week off or even just leaving at 5 p.m. every day. The goal is to get you out of the office so you can explore what that’s like and so your team can explore what they can accomplish without you always there.
I like to say that you have to let go to grow. When you step away from your business, your team can grow and so can your business. When you step into your life, you can grow, too.
Succession Plan Step 7: Get guidance from others who have been there, done that.
Transitions can be scary. Think about when you moved away from home for the first time. No matter how well prepared you thought you were, there were things you didn’t know how to do, whether it was painting a room, dealing with insurance when you got in an accident or signing a contract. You figured it out, either by doing research, learning by doing or reaching out to a parent, mentor or expert.
Get advice from a business broker, a financial planner or your business coach. Talk to colleagues who are working on their own succession plan or, better yet, who have already gone through it. Learn about the good, the bad and the ugly, and brainstorm ways to avoid or mitigate the bad and the ugly. Take inspiration from the good. Things are harder when you do them alone. When you have your team behind you and mentors and advisors on your side, even the biggest transitions feel easier.
Your Lasting Legacy
Your business is part of your amazing legacy. Ensure it is a lasting one by implementing a strong succession plan that encompasses these 7 steps:
- 1. Determine how you want to transition out of the business.
- 2. Decide when you want to transition out of the business.
- 3. Think about what you want to do beyond your business.
- 4. Position your business for a successful transition.
- 5. Develop your leaders by teaching them what you know.
- 6. Start enjoying your life now.
- 7. Get guidance from others who have been there, done that.
Do you need help getting started? Please reach out to me.
