John Kenney, CEO, Cotney Consulting Group
When things are rolling along for your business, a succession plan is not necessarily a topic that is looming in the front of your mind. It is probably one of the more ignored aspects of running a business, however, necessary and vital it is. Some day in the future, you will transition your business to a new owner, key employees or family members. When that day comes, you’ll want to have control of that process to ensure everything runs according to plan. Unfortunately, there are times when a business owner passes unexpectantly and there is no plan in place for moving forward.
One study shows that almost 60 percent of small businesses do not have a succession plan in place for either the owner or top executives. Most of those owners say they haven’t developed a plan because succession is so far in the future. Anything can happen without warning – people get injured or fall ill. Life happens. You can find yourself confined to your home office due to circumstances beyond your control or find your company without leadership with absolutely no warning.
There are many benefits to devising a succession plan before anything gets chaotic. With no successor identified, a business can become instantly crippled. Nobody wants that. You will want to ensure its preservation by providing a stable and orderly transition so when the time comes, succession will run smoothly. The sooner you can establish business continuity and a succession plan, the better.
One of the first steps is to determine what is essential to keep the business running smoothly. That includes a comprehensive strategy, a review of your facility, an analysis of your key positions and employees, and how they would be impacted should
circumstances suddenly change. Don’t neglect your critical data systems. Have a backup plan for infrastructure and applications too.
Many of the aspects for your succession plan will be industry-specific. So, work with your key employees and advisors to identify and address challenges you may face. The more information you have, the better your plan is likely to work.
Succession planning can trigger some excellent intracompany communications. Since the plan is about laying the groundwork for the future, it should be developed with the involvement of key employees. This can improve the way everyone works together.
Consider having a human resources expert trained in succession planning who can help out.
Planning for succession forces you to think long-term. Go beyond focusing on the latest earnings or the weekly business meeting. Take time to think about your company’s future. Make sure you have leadership development in place so you can train everyone
in their appropriate leadership roles. This will set a winning course for your company.
Planning for succession can keep your employees motivated. It sends a positive message that there is a future in the business. It shows your staff that you are committed to developing each one for future leadership positions. It also demonstrates your commitment to internal promotion and stability. Finally, it can increase employee confidence in the company.
In the long run, succession planning can save you money. By having leadership succession in place, you will have less to worry about in terms of an unexpected vacancy. “Surprise” leadership vacancies can leave you searching for a qualified employee and paying more than you feel comfortable paying. Have a succession plan in place for your leadership positions to avoid this.
In addition, have a plan for promoting from within so you can avoid paying a premium to fill a position.
Think about all key positions – CEO, COO, Executive Director, Payroll Manager, Controller – all of them. So many companies have no plans for replacement personnel should someone suddenly disappear, so, create a strategy now. Establish a trajectory for every one of those positions. This also helps you in identifying your top talent.
Gather financial documents. Consolidate your valuation data, your tax returns, inventory and all other relevant and up-to-date financial records. Be proactive at organizing your financial records so you are ready when something unexpected occurs.
Establish legally binding buy-sell agreements, which are contracts used to reallocate business segments should the owner die or be unable to carry on. These documents can formalize a sale price, the value of each owners’ shares and rules on who is eligible to buy. This will also reduce the risk of any conflicts between partners or family members.
Name successors. Doing this now puts you in charge of what happens in the future. Finding the right people for the correct positions takes time and leadership training. Take inventory of whom you have in your organization to trust with your company’s future.
Failing to have a succession plan in place puts your entire company at risk. How many times have you heard about a company floundering to stay afloat once the CEO retires? Stuff happens, especially in these times when people switch jobs and even switch
careers regularly. It may not be so much about what happens if someone leaves as it is about what happens WHEN an important
employee exits. You always need someone who can pick up the ball and run with it.
Include as many details as possible in your succession plan and review it several times a year.
John Kenney has over 45 years of experience in the roofing industry. He started his career by working as a roofing apprentice at a family business in the Northeast and worked his way up to operating multiple Top 100 Roofing Contractors. As CEO, John is
intimately familiar with all aspects of roofing production, estimating and operations. During his tenure in the industry, John ran business units associated with delivering excellent workmanship and unparalleled customer service while ensuring his company’s strong net profits before joining Cotney Consulting Group. You can contact John at jkenney@cotneyconsulting.com.
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