By Bridget McCrea
In “What Does Your Succession Plan Look Like? (Part II),” tED magazine explores the “new rules” of succession planning and outlines the key strategies that distributors should be using to prepare for the next generation of ownership now. Here, we dive even deeper, in a Q&A with a succession planning expert.
Succession Planning Q & A
Here, Michael Beels, lean program manager for the Lean Business Solutions Team at the Michigan Manufacturing Technology Center (The Center), shares his insights on effective succession planning:
Q: Why do companies need succession plans?
A: There are roughly 22,800,000 family-owned businesses in the United States that do not have a formal plan to carry on the owner’s vision after he/she is deceased or exits the business. With only 35% of these businesses successfully making the transition to a second generation, both legacy and a significant number of jobs are at risk.
Q: What goes into a suitable succession plan?
A: Above and beyond the need to find resources for financial planning, estate planning, business valuation, operating agreements, buy/sell agreements, trusts, etc., a business owner should consider the following: personal income requirements, future involvement, upcoming investments, and legacy.
Q: Who should be involved in the process?
A: All family members, even those who are not currently part of the business, and all key employees.
Q: What strategies should be incorporated?
A: Tactics include any business competencies that need to be developed for key personnel to achieve strategic goals, planning the transition of roles and responsibilities of key management members, and determining whether the successor of the business will be found internally or externally.
Q: How often should a succession plan be updated?
A: At a minimum, annually.
Q: What should be top of mind when developing a succession plan?
A: Business owners must determine what they want to do with the business. Do they plan on handing off the business to a family member? Sell the business? Remain an active participant even after retiring? Answering these questions will lead ownership down the correct path for succession planning. It is highly recommended that business owners plan for “Emergency Succession.” In other words, what will happen if the leader was unable to remain in that role due to emergency purposes? What if they become disabled, incapacitated, or even die? Would the business continue? Everything from key contacts to computer passwords must be addressed.
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at email@example.com or visit her website at www.expertghostwriter.net.
Tagged with business, succession, succession plan, tED