It takes time to build a business, and it can take just as long to create a strong succession plan.
Many business owners can’t imagine a life without the business they built, so they often postpone planning for their own retirement and the sale or transfer of the business. That doesn’t work out well.
There are steps to take when business owners decide to actively engage in planning for their business to continue to thrive after they step down. This article from Forbes, “Eight Factors To Consider Before Retiring From Your Business,” offers some useful tips.
- Plan Ahead. A good plan is to prepare, in this case, years in advance. Pinpoint the major areas that could hamper the sale.
- Identify A Successor. Have a detailed succession plan in place. Identifying your successor(s) early in the process will allow you time to gradually place them in their new responsibilities and give them the benefit of your wisdom and experience.
- Make the Business Work for You. If your business would break down the second you step away, you’re working for your business rather than your business working for you. The time to think about your exit strategy, is when you start your business, not when you’re ready to exit.
- Prepare an Exit Plan. Because most owners depend on their businesses for income, a lack of planning could put their main source of income at risk. It’s critical for a business owner to meet with her legal and financial team to decide on the best exit strategy. Learn your options and make an informed—rather than an emotional—decision.
- Keep Working After the Exit. Stay on for a few years through the exit to let your buyer have some time to transition and structure better buyout terms for you, as you help them grow through the transition.
- Make Sure the Systems and Processes are Solid. With processes and systems in place, a leadership change will be more likely to proceed smoothly. Any business that is successful should have these in place anyway: best practices, key performance indicators, job and responsibility descriptions and an organizational chart. Clarity for employees and managers is crucial for a transition.
- Delegate Responsibilities. Confirm that all logistical areas are covered, and that there are backup plans in place. Make sure the person who will be leading the business, is focused on maintaining the corporate culture during the transition.
- Instill Your Values During the Transfer Process. If the transfer is planned well in advance, responsibilities and value systems can be transferred to the new owners and managers. Some owners decide to maintain some shares in the business, so that they can keep an eye on—and have a say in—how the transition is taking place.
Reference: Forbes (August 27, 2018) “Eight Factors To Consider Before Retiring From Your Business”