When the time comes to hand over the reins of your company, a timely and thorough succession plan can help you, your family, and your business continue to thrive after the transition. Development of a succession plan Well before it is needed is the most important success factor; however, there are a lot of tasks to complete in preparation for this milestone.
Because founders devote a lot of time and effort to their vision, target market, and company culture, there is often little time left for activities like succession planning. In an August 2021 survey of 580 Human Resource Management Society members, 56 percent said their organization did not have a succession plan. Only 21% reported that they had a formal plan, while 24% said their organization had an informal plan.one
Even in the early stages of your company’s development, the time spent thinking about your succession plan can have a significant impact on your long-term success.
To help you get started with your succession planning, we’ve compiled a list of key elements to consider before you transition from your business.
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- Make the decision to sell directly or move on to the next generation of your family.
- Determine the desire and ability of your family members to own/manage a business
- Think back to the post-sales phase of your life.
- Think about the level of participation/control you want to have in the business after the sale.
- Determine how to stay focused as your day-to-day responsibilities change.
- Coordinate your intentions with your spouse regarding the business
Amazing Succession Statistics – 65% of firms surveyed by Stanford University did not ask internal candidates if they were interested in being promoted to the CEO position.2
- Create the most efficient company structure for your transition
- Familiarize yourself with current industry trends and the competitive landscape of your business.
- Research the type of buyers who might be interested in buying your business to help you align your goals.
Amazing Succession Statistics – Current CEO turnover is the highest in 20 years, with an average CEO tenure of less than five years.3
- Accurately calculate the value of your business interest
- Find out what your personal finances will look like after the sale
- Determine your current income needs
- Review your medium and long term financial plans
- Review property planning documentation
- Rethink your personal investment strategies
- Communicate your revised financial plans to family members and loved ones
Amazing Succession Statistics – More than 74% of executives report that they are not prepared or trained enough to deal with the challenges they face in their roles.four
- Assemble a team of industry consultants to help validate your business plans and decisions.
- Link and review plans with your professional services team, including:
- Tax Specialists
- Estate Planning Experts
- Investment Advisors
- Investment bankers
- Family office consultants
Amazing Succession Statistics – 86% of leaders believe that leadership succession planning is of paramount importance; however, only 14% think their organization is doing it well.5
Deadlines and taxes
- Develop/revise your property tax plan
- In most cases, a successful business transition relies heavily on careful estate planning.
- Allow sufficient time to complete your succession plans prior to handover
- Having succession plans years in advance of the sale provides financial benefits and peace of mind.
Amazing Succession Statistics – Only half of the companies surveyed documented the skills required for the next CEO.6
More information about succession planning
For more information on business succession, read our article “Are you thinking or about to sell your business?to delve into the issues we covered today, such as corporate structure, cost management, and capital transformation.
Design your succession plan with our team of experts
As we have said, creating and implementing succession plans takes time, as well as a dedicated team with a full understanding of your personal and professional goals. If you would like a partner to help you develop a succession plan that suits your needs, contact an SVB Private Asset Advisor to get started.
As your primary point of contact, your SVB Private Equity Advisor can help translate your needs into a workable plan and connect you with the additional expertise you need to make the transition smooth. Contact us today and let’s get started on your succession plan.