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Business succession planning in 2021: Two tips

On Behalf of | Nov 23, 2020 | business law

If your business does not have a succession plan in place, you are not alone. Recent estimates find less than 55% percent of businesses are training a successor and 39% have no viable candidates for the role. Unfortunately, this lack of proper preparation for the future of the business can set the enterprise up for failure.

Business owners can mitigate this risk by putting together a succession plan well before they plan to retire. This allows the owner to include a transitional period, if appropriate, to help better ensure the success of the business after they leave.

Considerations for a smooth succession

Before putting the plan in place, it is helpful to consider the following:

  • Skillset. Business owners should determine what skill sets are necessary to hold an executive position within their organization. Although competency in finances, marketing and communication as well as the ability to appoint the appropriate people to roles within the organization are basic qualifications, some businesses may benefit from someone at the helm who has knowledge of certain marketplaces, like health care or technology.
  • Candidates. Once you have a better idea of the type of leader you are looking for, you can begin to look at the pool of candidates for a couple of options. It is often helpful to proactively prepare a candidate for the role. Those who begin to groom employees within the organization generally report a 70-to-80% success rate, while those who hire external candidates to take on this role report a 50% success rate.

Business owners who begin these discussions and start preparations can ease the stress that comes with transitioning out of their role. These steps can also help to better ensure the legacy you worked to create lives on and continues to thrive.