You may have built up your business with a lot of precision and hard work, but at the same time you should be mentally prepared also to sell your business, retire or leave the business due to health or other reasons as the case may be. In order to confirm that your business does not suffer in your absence, it is extremely important to have a proper succession plan ready. A good succession plan assists a smooth changeover without disrupting the operations.

Succession planning is a term used to describe the strategies you can employ to ensure that your future business transition is seamless. It is an exit plan which designates the people who are entrusted with associated responsibilities after you decide to quit.

Steps Involved in Succession Planning

Succession Planning is a time consuming and long drawn process. A few important points which should be considered before starting with a succession planning are:

You should have sufficient time in your hand to plan your exit strategy;

You should decide upon the most suitable strategy or exit plan as this is going to effect the long term operations of the business and even your future plans;

You should assess the impact of the exit plan on the stakeholders and the other staff members; and

You should seek the advice of qualified legal and finance professionals to guide you through the process.

Benefits of Succession Planning

Succession planning can be a key part of your business development and growth process. It helps you to transform your business from having one power center to a performance driven organisation. A long term and well thought out business succession planning provides incentive to your staff and other key stakeholders to work hard and be a part of the decision making process. In turn, it maximises the value of your business and prepares it for meeting future needs. It also helps you to build a non-principal dependent practice, thus increasing the capital value of the business to the potential buyers.

Types of Succession Planning

Succession Planning can be of 3 kinds:

Ownership Succession which involves transfer of ownership of the business after a set period of time. The business should be groomed properly so that it is attractive to the investors.

Management Succession which involves decisions regarding who will run the business, what changes will occur, when they will be accountable for results and how results will be realised.

Internal Succession which involves a long drawn grooming of the in-house talent for the eventual transfer of management decisions and sometimes ownership.

As soon as you decide about succession planning, you should see whether your business is well settled and prepared to take the next step. You should also look for a worthy successor. If you are planning to sell your business, you need to understand whether it will fetch appropriate price in the current business scenario.

Similarly, if you wish to groom anybody within your staff or among your family members to pass the baton in their hands, you need to look out whether the person of your choice has dynamic capabilities and decision making power which will help your business to grow.

You should look at a number of issues including:

Identifying suitable talent;

Identifying current leaders;

The ownership and decision making structure;

Risk analysis; and

Mentoring and support.

Any decisions regarding succession planning require a lot of legal guidance and our team of experts at Owen Hodge Lawyers can guide you in every aspect of planning the most suitable transition of your business.

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