Why do you need a succession plan for your company?

| Nov 8, 2021 | Business Succession

They say you are only as good as your last performance. When you run a business, that means that however great your reputation is now, it would not take much to lose it.

All businesses need a succession plan regardless of size. You need to plan for the fact that you will not always be here. You might intend to retire from the company at a certain age, but illness or death could warrant someone stepping in for you sooner. 

Imagine you run a cafe. You have a loyal customer base and a continuing stream of new customers, attracted by the good things they hear about you. Then one day, you get ill and can no longer spend your days ensuring everything runs smoothly.

If you have a plan, it increases the chance someone can step in and maintain the business as usual. If you don’t have one and are forced to bring in an outsider, they might not understand the business or have the same passion for it. If things start to slip, your staff becomes unhappy with the new management and leaves, then customers that have frequented your premises for years will go elsewhere. As unsatisfied customers post negative reviews, the stream of new customers will drop to a trickle and soon, the cafe’s doors will close forever.

What should a business succession plan cover?

Here are some of the things to consider when making your plan:

  • Who will take charge, and when could they? Let’s say you want your daughter to take over the cafe. Yet, if she is only 15-years-old, you might need to consider an interim person to run your business until she is ready to do so.
  • Do they have the knowledge to take over? Your daughter knows how to make great coffee, serve customers and prepare the food. Does she know how to order from suppliers? Does she know when to apply for license renewals and file tax returns?
  • Do they have the legal authority to take over? Can your successor sign documents on behalf of the company and access money to pay bills and wages?
  • Do they have the confidence of others? Maybe you prefer for your son to run your business because of their legal and financial know-how. Yet, if his hotheaded nature will put off customers, upset staff and destroy your long-standing supplier relationships, your business will soon shut down if you give him control.

You do not have to name one successor. Sometimes, splitting the roles works better. Yet, whatever you choose, you need a plan with the necessary legal documents in place to enable a smooth transition whenever required.

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