Business Succession

7 Steps To Get Entrepreneurs Started With Succession Planning

June 13, 2024

An image of a family reviewing their succession planning advise from their local Markham CPA firm.

The power of an organization is that it continues for generations. What was started by the founder continues to become a multi-national business and sometimes a conglomerate. Behind such business houses is robust succession planning. The founder was a visionary who carved out the future of the business, building up a strong talent pool that could lead the company to great heights. If you also want to take your venture to great heights, you should plan for tomorrow today.

Getting Started on Making a Succession Plan 

No succession plan or business plan is foolproof. Just because one plan didn’t work doesn’t mean you will stop planning. A failure makes you stronger as you now know what doesn’t work. For any plan to work, you need to review your plan, brainstorm, make changes, calculate risks and know where to contain losses. But before all this, you must create and execute the succession plan. 

A succession plan is about passing the torch to the new generation to lead the business while you and your ace team venture into the role of mentors. It could free up your time to pursue a new venture or take a break. This new generation can be a family member, an existing employee, or a new hire specially recruited for that role. 

Today, we will look at a step-by-step process to get you started on succession planning. 

Step 1: Identify the Key Executives That Are Your Business Pillars 

Before planning your business succession, look at your business from a satellite view. Be an observer and see which executives are irreplaceable, including yourself. You could adopt a top-down approach, starting with yourself (CEO) and then chief positions and key executives.

Pen down their responsibilities, how they add value to the organization, and what qualities make them irreplaceable. This will help you create a profile of people that your business needs. Once you identify your business needs, you can start your headhunt and prepare a succession plan for them.  

Step 2: Quantify the Risk of Keeping the Position Vacant 

Once you know the value these key personnel add and the importance of that position, try quantifying them by creating a scenario analysis where that position is vacant. Planning is all about preparing for the worst. How will it impact your revenue, client accounts, and short-term goals if that executive suddenly leaves or meets with an accident and cannot perform the duties?

Once you quantify the role, you can prioritize the succession plan for that position. Whether you need just one or more than one successor can be determined based on the importance of that position. Remember, the successor could leave the organization before taking over the role. Also, consider if two or three people could divide the responsibilities without a successor, ensuring minimal impact of executive change on the business. 

Step 3: Find an Ideal Candidate for Succession 

You have the requirements and the value of the position. It’s now time to find the ideal candidate for the succession. The best place to look is within the organization, probably in the team those executives lead. However, you could stay vigilant around your surroundings and make a mental note of the skills employees’ exhibit. 

No candidate is perfect from the start. They develop skills over time as they learn and gain experience. Technical expertise alone is not enough to be a good leader. You need a person whose objective is aligned with that of your business and who shows the skills required for the role. (Refer to the skills you penned down when profiling the position). 

Such qualitative skills are difficult to scout for just from interviews. Yet you can use case studies and casual interviews, even if it’s an internal employee, to give the candidate a chance to share their ideas, career goals, and ambitions. Maybe a question like what you would do differently to improve the operations and then giving them a chance to do it with a small group could help you find your candidate. 

Step 4: Communicate Your Succession Plan 

When you find your candidate, ensure everyone is on the same page. Do not assume the candidate may be willing to take up a leadership role. Talk to them and the key executive, ask their views and see if they are ready. Only when all parties are on board can the succession ship sail smoothly? 

Step 5: Prepare a Transition Plan 

The executive should not feel threatened, nor should the candidate feel stuck. Hence, preparing a transition plan to chart each person’s career development is essential. Once the successor takes over, there should be someone who can take the successor’s place. The critical executive should also have something to look forward to, maybe a new venture or advisory role. 

The plan should state:

  • How long will the current CEO/executive stay in the role?
  • The timeline for a phased transition of responsibilities.
  • Any other role the CEO/executive will take on after stepping down.

The transition roadmap should incorporate any external training (technical and soft skills), passing on smaller projects to the successor, giving them a chance to showcase their talents, make mistakes, and guide them where needed. 

The roadmap should give the successor some liberty to perform and demonstrate what they can bring. Too much handholding or micro-managing could dilute creativity and out-of-the-box ideas. Also, a longer transition time could cause the candidate to lose interest and go elsewhere. 

Step 6: Document the Transition 

While implementing the above steps, document the entire process for future reference. If the succession plan fails, you can return to the planning board, refer to the document, and find gaps. When you write down the process and join the dots, you realize the strengths and gaps in the plan. And if the succession is successful, it could enhance the recruiting process and help you build a more robust talent pool. 

Step 7: Take the Help of an Outside Expert

A management change can have significant legal and financial implications. And you may need outside help to execute the plan fairly without any vested interest. A professional business consultant can assemble a team of lawyers, tax experts, accountants, strategic consultants, and business valuators and orchestrate the transition. 

Contact KSSP Partners LLP in the GTA to Help You Prepare and Execute a Succession Plan 

Talk to a professional consultant to help you plan and execute your succession smoothly. To learn more about how KSSP Partners LLP can provide you with the best succession planning expertise, contact us online or by telephone at 289-554-5997.