How to Create a Business Succession Plan & Why You Need One

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You have probably already read my post Does Your Business Have a Succession Plan? Now that you know how you rank, we can talk about getting your business a succession plan.

If your total score is 80% or lower, you should urgently look into creating a business succession plan.

I will make suggestions on a couple of high-level aspects of your business that you should interrogate, but it would be wise to do this with a seasoned financial planner (not all financial planners are well versed in business advice) and a CPA.

Step 1 – Recruit

Hire people to do what you cannot do.

Even if you hire someone to do what you do, make sure that they do what you hired them to do better than you can, and if they can’t, foster an environment that will enable growth so that they can ultimately become that good.

It only costs on average about 20% more to hire top talent, yet the potential returns are infinite. Hire the best and pay them their worth.

Step 2 – Delegate

Hire people to do what you can do. I can’t tell you how many businesses I have consulted with where the owner wants to do everything in the business. This is more often the case with professionals than anything else.

They may hire staff, but really these employees are there to replicate the business owner, not so much to be part of a team. Said differently, the business owner hires people to do what they would do but don’t have the time to.

This is a classic case of running a business and not owning one. You may feel proud as a business owner, but really the business owns you.

Every big business has various functions. Audit firms don’t only hire audit professionals; law firms don’t only hire lawyers, advocates and attorneys; engineering firms don’t only hire engineers.

Learn to delegate and focus on what you are good at. Delegate. Don’t try to do everything.

Step 3 – Outsource

Try to streamline your business processes and build a team around this process flow. In the same vein, focus on your core business (at least at the very beginning).

For example, if you own an engineering design business and having customizable design software could give you the edge in the market you should not try to own the software development part of the process and lose focus on keeping your engineering designs on the cutting edge of innovation in your sector.

As software development may not be a core function of your business in the growth phase, it would be best to outsource this function until a time where you may be able to acquire a well-established software development business so that you no longer need to consult and pay fees to a third party software developer.

Step 4 – Build Internal Systems

Process engineering is one of the best ways to maximize efficiency and minimize capital leakage.

A good business is comparable to a well-oiled machine; the machine generates revenues.

A machine is nothing more than a collection of systems. McDonald’s without a doubt has mastered this science and turned it into an art and garnered a great deal of success as a result. Even though McDonald’s has a very high staff turnover rate, doing business with them is always smooth and predictable because even though a lot of their staff is relatively new, they all form part of a system that predates their arrival and for as long as the system is a good one, the machine will run smoothly.

Step 5 – Insurance

Business assurance is an absolute imperative for any business owner who means to have a solid succession plan.

Get yourself familiar with Buy/Sell Agreements and Key Individual Assurance. These types of insurance will see to it that your business continues to run smoothly in the event of the losing of functionality or passing of a key individual or business partner.

Step 6 – Focus on Strategy

As a business owner or entrepreneur, anything that diverts you from concentrating on strategy is a distraction.

You should be very intentional about delegating or outsourcing these roles.

Your focus should always be on controlling the machine that is your business.

Conclusion

Your role is to grow the business, not run the business.

If you are the lifeblood of the business, you are the business and you don’t own the business so much as it owns you.

If you follow the guidelines above, you will eventually have a business that has a proper succession plan. Some businesses will be able to do this more quickly than others. If you struggle to reach these milestones it may be that your business model isn’t a scalable one and that you need to spend more time reading books.

Either way, if you own a business you have taken your first step in the right direction. Now go big, or go home.