Seven steps to succession planning

Written by Myles Murchison
  1. Build your business to sell it. “The best time to plan is when you don’t need to plan,” advises Thane Stenner, of Vancouver-based T. Stenner Group, a division of CIBC Wood Gundy.
  2. Write a strategic business plan. How do you see the future of your business? How is it going to prosper and compete in the future?
  3. Create an organizational chart of your company. Determine who’s responsible for each job. This information is critical for potential buyers because it demonstrates that the firm’s operations are not dependent on you the owner.
  4. Make yourself replaceable. Hire the employees and install the procedures that will allow the company to grow without you. When the time does come, you’ll have a great business to sell.
  5. Determine your successor. Identify potential buyers or successors. With specific corporate acquirers in mind, you can groom your company to be more attractive to him or her. If you’re planning to hand-off the business to an employee, figure out how you can help him or her finance the purchase. If you want to give the business to your children, be sure they want to take over the company and consider what economic imbalances or bad blood the handoff might generate. It’s an emotionally difficult area (one of the reasons entrepreneurs avoid it), but you can’t take the next step without it.
  6. Inform your successor. If it’s one of your children, the appropriate education or management assignments are in order. If it’s a key person already in your company, better he or she become part of the transition.
  7. Assemble an advisory team. Your accountant and lawyer will play key roles in facilitating the sale and its repercussions. An insurer can help fund tax obligations so that your family isn’t faced with a catastrophe should anything happen to you. When you’re ready, call in a chartered business valuator.

© 2005 Myles Murchison

Originally appeared on PROFITguide.com