The objective of succession planning is though simple, but vitally important. It would help  ensure that the respective organisation would have:

• Continue the operations without much inconvenience

• Qualified leaders in place

• Proper understanding of what roles are crucial to your bottom line

Avoiding Succession Planning Issues

The matter of succession is inevitable in the field of business. When it comes to the matter of  retiring or transferring the ownership, it is important to understand the common issues involved with the process. When a closely-held business owner, such as a family business, is asked about his or her succession plan, the topic has been little thought about due to the amount of time which is consumed in day-to-day operations. A business owner would have an emotional and financial investment in the company and would often rely on the gains from such investment to  fund their retirement. The earlier a succession plan is put into motion, the smoother the transition process from one leader to the other would take place, hence maximising the financial rewards. 

In order to help the business owners understand the common issues faced in a succession planning, a comprehensive summary of some of the common problems faced during the succession planning have been discussed below.

1. Mixed Emotions with the change

For business owners generally, it will be hard to decide a day for retirement. It would make it even harder when an individual’s current position involves operating a business which they have built from the ground. Another important reason of finalising a succession plan is to deal with these mixed emotions during the succession. 

Uncertainty on part of  the owner also increases the chance of risk in the succession process. An  owner could be hesitant to develop a plan as it would finalise an inevitable end to their role in the  business. In order to eliminate such fear and indecision at a later stage in the process, it is important to focus on developing a plan while there is still time a plenty. 

2. Timing

Deciding upon a time period would be the most significant problem which a business owner will  have when deciding upon the succession planning. Preparing the succession plan for his business would force the owner to think about the matters such as mortality and even the business competency as the time passes. It could be an uncomfortable discussion to have, however it is vital to determine the livelihood of the a company in case a resignation, death, retirement, or disability occurs. 

It is, therefore recommended to actively prepare a succession plan., as in an alternative situation,  when there is nothing decided upon the future of the business at all, in case something happens to the owner or any other crucial member of the business, it could lead to a dissolution of the business structure. Hence, succession planning is crucial to mitigate risk and provide a foundation for the future. 

3. Identifying a successor for the business

Not every business owner could be fortunate enough to have a competent son or daughter who could easily fill the expected role of a successor. In case such option is not available, there are numerous steps which could be taken when searching for a successor-  

• Identify characteristics & skills:-Business owners, generally try to search for a successor who is similar to that of the current owner. Such individual would often share many qualities which are similar to that of the current owner. It is, therefore important to prepare a list of the necessary characteristics and skills of a person as a whole. Thus, finding such qualities which make an owner successful. This individual would be different in various ways, however would contain appropriate abilities so as to help them continue the success for their business. 

• Promote from within the Company:- A successful business would mostly be run by a proper team of individuals. Thus, it is important to identify such qualified individuals from the management and throughout the business who may have an interest in going further and expanding their role in the business. 

• Transferring responsibilities:- After identifying the successor, it is important to have a succession plan ready about transferring the various roles and the decision making power as well. But, in most case the owners would generally pass on certain responsibilities, however keeping the actual control. It will be beneficial to follow the succession plan which has already been decided and allow the successor it flourish in their role.

4. Setting small goals for succession plans

Similar to any good business plan or budget, it is crucial to be realistic and set expectations which could be gained. For example, one may start by preparing goals. Such goals would be useful for the  business. It must be ensured that every part of the succession plan is followed through properly. 

A timeline shall be prepared as to when particular things would occur, it could generally be decided according to the age the owner expects to retire. Without clear goals, it will be hard to know such plan is on track or is being executed properly.

One may communicate the plan with the management, family members, or advisors of the company. It would make it easier for an owner to be accountable for every step of the plan. An outside view of the succession plan would help provide additional opinions and thus, help ensure that the plan is practical.

Lastly, it is important to be active in the transition. 

After a succession plan is finished, it is required to be updated every few years. Any change in the employees, industry or market conditions could lead to revisions in the planning. Even when there is no significant change, there is still ground for improvements every time a succession plan is revisited. 

5. Valuation of the Business

One may not think that there is no value in obtaining a valuation if there is not actual succession is for several years. Also,it could be challenging to decide upon a succession plan without understanding the current value of the respective business. Value of a company changes over time, however a business valuation would provide a benchmark for the purpose of planning. Thus, having a business professionally valued would create a reliable number which could be communicated to the potential buyers.

Why Sharks of Law ?

• Single Platform- Sharks of Law offers you a single platform where affordable and easily accessible legal advice and assistance about the matters related to corporate field are provided with such as planning for the succession, legal paperwork for the same, etc.

• Expert advice- A client would need expert guidance and advice for issues troubling them. Sharks of law offers experienced advocates who offer best guidance for proper procedure required.  

• Specialised advice- We offer you required guidance and advice for your legal issues.

• Highly qualified advocates- Sharks of Law offers you a team of brightest and most driven lawyers who have years long experience in their field.

• Easily accessible legal services- Sharks of Law believes that legal assistance should be easily accessible as one may need it at any time of the day, hence you may contact us through any medium you are comfortable with.