Is succession planning the way to protect your business?

50% of small businesses don’t survive past the 5th year, but businesses that plan for the future have a higher survival rate.

Research also indicates that up to 40% of business owners will be looking to retire in the next 5-10 years.

So how do we give our businesses a better chance of survival?

Succession planning means transitioning from one state to another. Put simply it is developing and upscaling a business. It can mean planning a business leadership transition through family or otherwise, or simply realising another level of staff is needed for the business structure to grow. A plan is then formed to implement it.

A business or company is only ever as strong as the people in it. Most employers know that spending time on their staffing structure and getting the right people in the right roles will take the business forward. Without that in place, the business will stagnate and go backwards.

Savvy companies have utilised furlough during the pandemic. Many CEO’s, including SMEs used Furlough to implement succession planning programmes or staff development. They were aided by the digital transformation that happened so quickly at the start of lockdown. Those business coaches and experts running succession planning programmes like myself, moved ourselves and our training completely online. We were able to collaborate with big names across the world to deliver top class programmes for our clients.

How to implement succession planning

Savvy companies have utilised furlough during the pandemic. Many CEO’s, including SMEs used Furlough to implement succession planning programmes or staff development. They were aided by the digital transformation that happened so quickly at the start of lockdown. Those business coaches and experts running succession planning programmes like myself, moved ourselves and our training completely online. We were able to collaborate with big names across the world to deliver top class programmes for our clients.

Staff at home took part in online training programmes and webinars to grow their skillset. Through a succession planning programme during lockdown, one of my clients was able to free up the current management to move up to executive level. I helped them develop a proper hiring and development framework. They were able to fill the management roles, identify the talent gaps and close them. Problems I have encountered with clients hiring structures have been as simple as interviewing telephone customer advisor roles in person rather than on the phone. The client wasn’t retaining the right staff, as soon as interviews took place on the phone he found the right talent for the job. He could hear clearly how they could do the job and he could also get through more applications per day.

Many business owners I work with want to become more strategic and look at the longer-term picture.  They need a succession plan in place to develop the team to free up the business owner. A past client used succession planning to take a step back from the day to day running of his business while growing it, with the ultimate aim of selling it. This, we did over a period of 9 years. His business went from a turnover of £55,000 per annum to £8 million by the time it was sold.

It’s the same thing when you’re trying to move the business from one generation to the next. In order for business leaders to hand down through the family, they need to get the people below trained up. It is important to get a plan in place so that once that transition happens the business doesn’t go backwards.

If you are looking at going down the IPO route, then again, you need a succession plan in place that will allow a very successful IPO to take place. The same principle applies to going down the joint venture route or selling the business. To get the maximum price for your business, start a succession plan three years out. This is where you make sure that the business is properly systemised. You have the right team in place. When you go to sell the business, you get your maximum valuation.

Post Sale-Succession

Many companies come to me for post-sale succession. Two or three year tie-ins are very common and a big part of the final payout is often based around the performance of the business. To hit those numbers, you may need a new succession plan. The team that got you to the point of sale may not necessarily be the team that gets you to your overall exit. So, there’s various scenarios that actually require a different level of succession planning.

It is just as important for SMEs and even sole traders to consider succession planning as it is for the bigger companies. Sole traders should look to grow their business as soon as possible. There are roughly 5.5 million SMEs in the UK and around 4 million of them are sole traders. It’s important to take that job and turn it into a business.

If a sole trader is ill or on holiday the business stops and that can be risky. A sole trader needs to learn how to become a business owner. That’s where their transition starts. Start looking to hire people. Look at the gaps in your business, where it needs to grow and hire staff to help you even if that’s on a contractual basis.

It’s important to look at growth within all businesses. For sole traders, succession planning starts with hiring staff; with SMEs it’s about plugging the talent gaps and with larger companies it’s looking at training existing staff to move up and creating another tier of management.

Peter Boolkah is a world-renowned business coach, speaker and entrepreneur who inspires and empowers you to create the business of your dreams, igniting real and lasting change for you and your business. He holds a BA (Hons) in Business Studies from Southbank University, London UK. Global Trainer and MasterCOACH Director for Action Coach. Member of the Forbes coaching council. Member of https://coaches.scalingup.com/ Scaling Up Coaches. https://boolkah.com/