BUSINESS TRANSITION PROCESS & LEADERSHIP SUCCESSION PLANNING
The business transition process and leadership succession process are not a “I need to get around to doing this” task. It’s a living process that you should start as soon as possible. You’ve given it some thought and almost figured out how you want to transition your business, but a “thought in your head” transition and leadership succession plan is not plan at all, it’s a dream at best and as far as dreams go a potential nightmare.
Let’s break down the business transition and leadership succession planning process?
Leadership succession planning is a process for identifying and developing new leaders who can replace old leaders when they leave, retire, or die. Here the planning is usually a closed process, so that those who have been selected are not likely to know that they are on a leadership succession list (this is not good for you or your business). Leadership succession planning can be defined as the process of identifying critical roles in a company and the core skills associated with those roles, and then identifying possible internal candidates to assume those jobs when the incumbent’s departure is proactive and planned or suddenly thrust upon the organization.
Ownership transition planning determines the future of the business. You will transition out of your business at some point, and without a defined plan you are leaving your personal and financial future to chance. Business transition planning determines how to smoothly transfer the ownership of your business while maximizing your personal financial security, minimizing taxes, and protecting your retirement assets.
Planning includes not only when and to whom you intend to sell or transition your business, but also ways to maintain your company’s value through tax planning and being prepared for unforeseen events. Through this process, you’ll gain peace of mind that both you and your company are ready for the transition.
Clarifying your goals and vision will help you know what’s important in your transition and leadership succession plan and where to put your energies.
Understanding who your key employees are and their impact on your business – including what might happen if they left – is critical to the due diligence process and shouldn’t be overlooked.
Foreseen and unforeseen circumstances alike could serve as the catalyst for your transition and leadership succession plan. It’s important to consider the consequences of the death of owners/partners, Divorce in which spouse has an interest in the business or is a partner, Mental/physical incapacitation from injury or illness and the sin of ignoring transition and leadership succession.
If it’s not documented, it a dream and eventually a nightmare for all the stakeholders you left to clean up responsibilities you ignored.
Your plan will be unique because you and your company is unique and writing it down will bring clarity to the succession and transition. Documentation leads to implementation. If you do all the thinking but never implement and fund the plan, you have the dream, which, again, is going to become a nightmare!
You should communicate your plan as a living framework to need-to-know stakeholders.
Companies and individuals change, and a rigid expectation of who gets to know your plan won’t serve you well. Here are some people and positions you should communicate your plan to: business partners and or fellow shareholder which are often your Spouse and adult children and or Internal successor candidates.
A transition and leadership succession plan is vital to the health and strength of your business. Our team of advisors can help you talk through your transition and leadership succession plan, whether you’re looking for help with valuation, strategy, planning, funding, or simply brainstorming ideas. It’s your plan – let’s make it happen.
Start by downloading our checklist
Our team members have decades of start-up, growth, recapitalization, turnaround, restructuring, mergers, and acquisitions experience across variety of industries originating, arranging, structuring closing mergers, acquisitions, equity, debt & securitizations capital raising transactions for the best-known public and privately held Canadian companies. Having led organizations and strategic transactions through Black Monday (1987), the Russian Flu (1998), the Dot.com Bubble (2000) the Global Financial Crisis (2008) and the 2020 Pandemic. Why not put our exhaustive experience & focus on the lower-middle-market to work for you?
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