How to Create a Succession Plan for Your Business

Cao Hữu Tín

When you leave your position as an owner, you need someone new to keep your company alive and flourishing. A succession plan is to choose a successor continuing your good work and improving what you missed. Many business owners don’t have clear plans for their business succession. If you’re one of them, you might want to read this article about how to create a good succession plan.

The vision for a succession plan becomes clearer when you ask yourself necessary questions. In particular, it’s vital to choose a suitable successor who will keep the company alive and flourishing. Here are questions you should consider before choosing a successor.

When Will You Leave Your Position?

You must have a specific time and avoid general sayings like “Maybe in a year,” or “I’m not sure.” There is no such a thing as “not sure” in business. The answer must be clear and straightforward before you start to invest time in a succession plan.

Firstly, you consider the state of the company and wonder if your position is hard to replace. If your business goes well and needs you to survive the tough future time, your succession plan should be delayed. Secondly, if you have no choice but to leave your position, imagine clearly how the company will go without you. Is there any big problem? If so, fix them directly.

For instance, you see the HR depending greatly on you to hire employees, and they are incompetent to resolve workplace conflicts. Imagine if they work without you, it would be a disaster. Ask them to change or they must go.

You have to outline those steps years before implementing them. Without a specific time for your leaving, your goals would be vague because all you have is a thought, not a plan.

What extent of impact do you achieve on employees?

When you have a big and positive influence on employees, they follow your order to work passionately and efficiently. Otherwise, they have zero respect for you, and the work efficiency reaches rock bottom. Understanding the extent of your impact gives you clues to choose worthy successors.

If you are a great leader, your successors have to follow the suit. If not, choose those who have new leadership styles and great visions. You should not lie about your ability because you can ruin the plan by choosing the wrong torchbearer. 

Using the succession planning worksheet is also effective to measure the candidates’ abilities.

Some people might think, “I am the owner, so I have absolute power and great influence in my hands.” They are dead wrong because holding the highest position does not mean you impact others significantly. The impact means your proven ability, leadership, and respect from all employees.

Remember these three elements:

  1. Proven ability
  2. Leadership
  3. Respect 

Think about how these played into your leadership, so your successors can improve what you missed.

Is My Potential Successor Coming From Inside or Outside My Team?

Firstly, you should consider high-rank candidates from your company because you work with them for a certain and already know how they perform. However, they must have three elements above, and then you have a list of serious contenders for your position.

After that, you should ask yourself who has the same mission and vision for the company as you, and those who match your mission should be the final candidates. You have to test them by assigning more work, putting them under more pressure, and observing how they handle it. 

In particular, they should play more roles in suggesting more ideas for the company vision, making reports about the business performance, expand their management to a broader extent, and more. These candidates must be tested through a succession planning worksheet to prove who is the real deal for your position

Another method is checking their first reaction to difficulty, which helps you know their composure with big future challenges. Don’t hesitate to ask them abruptly and regularly about their work efficiency because there is a famous saying of Seneca the Elder:

“Fire is the test of gold; adversity, of strong men.”

What Should I Tell the Successor About the Company?

Because they will be in your place when you leave, they need to know what you have done and how you handle challenges in the company. This step is super important for the succession plan because that person can learn from both your achievements and mistakes.

You must be honest to let them know about your role and how the company is going. Never lie to them and think they can handle all problems you caused without prior notification. Moreover, your successors are supposed to have specific plans for the next chapter of their careers. After you fill out the succession planning worksheet, tell them what they need to improve.

Giving them more influence in your decisions is a wise way to make them familiar with your roles, and you should have regular discussions with them to talk about current and potential problems in the company. The key thing is that the person has to understand your role and the company’s vision in the following years.

Are There Any Financial Issues You Need to Solve?

You should consider your business financial aspects, including owner estate plan, taxation implication, business valuation, insurance for protection planning, and more. The best tip is to ask financial specialists about your succession plan so that they can tell you detailed instructions. 

Remember that this part is complicated in a succession plan because of your involvement in the company shareholding, the size of your company, and related issues. Never underestimate the importance of financial aspects.

Brief must-do tasks to make your plan smooth:

  • Check the implementation of the five steps above and use a succession planning worksheet regularly.
  • If you find any problem in the plan, solve it immediately because your time is short.
  • Have backup plans for your successor, like finding potential candidates outside your company if you don’t want a chaotic situation.
  • Draw a vision in your mind about how the company will perform when you leave, so you can fix your plan, which needs to be more realistic.

The Aspire360 team is always ready to help you reach your goals in the succession plan. 

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