Avoid the rocky road and shape your succession plan early
With a clearer idea of your future direction, consider your options and put steps in place to prepare, writes Pitcher Partners Adelaide partner Lisa Tsoulakis.
Business owners and founders know that having a succession plan in place can help protect your legacy, your wealth and provide stability in the years ahead.
Yet only 45 per cent of businesses with under $10 million turnover have even a rough plan, let alone one that’s well thought out. So what’s the blocker? Why do so many small and medium businesses not have one?
For many, it’s getting started.
Succession planning is often seen as a single, monumental task. This perception explains why 31 per cent of business owners report not having enough time to commit to developing a plan.
While business leaders are buried in operational tasks, there is little time – or inclination – towards strategic, big-picture thinking like who will take over.
Succession planning may feel like shifting a heavy boulder – at first, it seems impossible.
But small steps and external support can smooth the path, and once that boulder begins to roll, momentum builds, and every step forward becomes easier.
The reality is that succession planning isn’t one single big task, nor does it require an intense multi-day workshop.
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Every business owner can take a series of smaller actions in the short, medium and long term to gradually progress plans for the future, even if they don’t plan to step away any time soon.
It is never too early to start the planning process, but it can be too late. So how do you get the rock rolling?
Visualisation can be a powerful tool, so let’s imagine your business in the next five to 10 years and your role in it.
Do you see yourself still leading the team with the same energy you do today, or transitioning out to pursue the next chapter in your life? If you were not in the big chair, do you know who would be?
When the picture starts to take shape, it’s time to voice that vision.
We find that succession planning typically takes between five and 10 years. Yet business leaders tell us they expect ownership or senior leadership in their business to change within the next 3.6 years on average. For some, it’s even less: 27 per cent expect change in the next 12 months.
Let’s not forget that sometimes change can also be sudden and unexpected, and in the absence of a plan, the future of a business can be left in doubt.
So, prioritise time in the short term to have a candid conversation with your trusted advisors and leadership team and discuss your long-term vision for the business.
Consider how this aligns with your personal and professional goals and the timeframes you have in mind for your next move. You may not have all the answers yet, and that’s ok.
We know 29 per cent of business owners said they were uncomfortable having the conversation but putting it off for ‘someday’ isn’t a sensible strategy either.
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Your external advisers are a great place to start as they can provide an outside perspective, an emotional check, and a sounding board to explore ideas or talk through your concerns.
With a clearer idea of your future direction, consider your options and put steps in place to prepare.
By starting early, you can break up big tasks into manageable actions for the medium and long term.
For example, if you are planning to hand over the business to a family member, as 28 per cent of small business owners do, ensure your views and timelines are aligned first.
Schedule any necessary training or development opportunities in the months and years ahead and mentor them as they gradually take on more responsibilities.
Similarly, if you want to attract an external leader to your business, factor in time to integrate them into the business and build relationships with key stakeholders.
Business owners shouldn’t underestimate the time it takes to find the right leader to take a business forward. It should be a well-considered choice, not a rushed decision to fill a gap.
Owners who want to look for a buyer, not a leader, should still dedicate time to considering what potential buyers will look for, and how to best position the business for sale.
Then if business records or accreditations need to be updated or new processes need to be implemented, this can be managed over time, saving a last-minute scramble.
Over time, these smaller steps help business owners to gain momentum with their succession planning and bring key people along on the journey.
Once the boulder starts rolling, business owners can usually control the pace of progress.
Starting early often allows for a steady pace and a smoother transition. On the other hand, starting late is like a boulder hurtling downhill—you’ll pick up speed rapidly and feel a little (or a lot) less in control.
But if you’re not moving at all, you’ll probably just gather moss. And no one wants that.
