How do we develop a top-notch Succession Plan?
Creating a well-crafted succession plan involves several steps and depending on your type of business or industry there may be variances, but some basics are likely universal.
1. Understand and Identify the requirements of your Business.
The first step is inevitably weighing in on where you stand. What is the current valuation of your business? What will you be gaining from cashing in (if you decide to sell)? Is this the right time to sell – or when? Getting a full valuation of your business, your assets and your human resources will give you perspective. This can be done internally, or you can reach out to professionals who can help you with the evaluation. While valuations at this time are volatile at best, setting a baseline is a necessary first step.
Adam Nihmey, Managing Director, Valuation and Litigation Support at Welch Capital Partners highlights the importance of distinguishing yourself from the worth of the business. In an interview with him last month he said,
“I think from an evaluation point of view, from what I’ve seen over many years, one of the most important things of anyone who’s going through this exercise is, you have to detach in some way, your value to the business. Build a business that has a stand-alone value away from your own contributions. It doesn’t mean that you’re not valuable. It doesn’t mean that you don’t drive a lot of the value of the business, but in order to maximize any price if you do transition and sell your business, you’re not going to be there anymore. So, you want to be able to get as high a price as possible with you not being there.”
You, as an Owner or CEO aside, the business must have a backbone of its own so that when you sell out, you get a substantial pay out for what you’ve tangibly built. And that is something worth building in periods of economic lull.
2. Review Talent.
Sometimes the hidden gems are right there within your organization, waiting to be discovered. So, get right in there and review your most important asset – your existing manpower! Especially in these times, your teams are a large asset.
Set up a program with HR or departmental managers to identify employee successes and achievements. Have discussions to scout out those with a great potential that can be built up further. If you’ve created a culture where turnover is low, keep an eye on talent with potential to go a long way. There’s always those that have been hired for a certain role but they grow out of their shoes fairly quickly, with a fire to really learn. It doesn’t have to be the managers you have recruited, but the natural leaders that share the same passion and drive as yourself that you want batting on your team!
3. Invest in your Employees
Sherry Deutschman, current Founder and CEO of BrainTrust, CEO of Sunset Ventures, and former CEO and Founder of LetterLogic Inc. scaled her business from a one-person operation out of her basement, to a $2 million revenue generating business by creating a desirable work culture and really prioritizing the importance of her employees.
“a lot of companies have profit-share programs and they're fine, but ours was uniquely created to create profitability and to reward profitability. And we took 10% of the net profit every month and split it evenly among the staff, regardless of their title, which meant that our custodian got exactly the same dollar amount that our CFO got.
And we told everybody that their job was just as important as everyone else's job in getting out a quality product. But it drove everybody to make better decisions and to be really engaged and to be vested in the company's success and in the bottom line.”
You can learn more about how she drove results through the power of culture in my podcast….
While Sherry LITERALLY invested in her employees, this doesn’t have to be the exact route you take. Investing in your team can be done in other ways – training and development being a top one. Work with HR to set training practices in place for employees, be it internally or through outsourcing to cut your costs on expensive external programs now. Not only do they develop new skill sets, but you also create a sense of loyalty where they are incentivized to stay with you long-term, through thick and thin.
4. Set the plan in motion and communicate
Once the strategy is finalized and in place, formalize it by having all those that will be implementing it onboard and then make sure to communicate it to your teams.
5. Evaluate the Effectiveness of the Plan and Make Changes if Required
Fiona Gilligan, Founder and CEO of Arranmore Holdings Inc, previously Founder and CEO of Trauma Management Group, underscores the importance of assessing, evaluating and implementing restructuring best practices to drive success for your business. Particularly resonant for me in these times where the temptation is to feel hopeless.
“I had lots of times in my companies where we had dips and lows and had to restructure but I never gave up. I took the failure as a challenge or the obstacle as a challenge and again, through data and everything, okay, how are we going to reframe and how are we going to re-structure from this and keep moving forward. And always recognize... the third thing is to recognize that your staff, your contractors, they are really your clients. Those are the people that you cannot survive without. So, pay them more, treat them better, give them more special training and education, nurture them, nurture them professionally, be available.”
It's never too early or too late, or the wrong time, to start Succession Planning. Now that you know what’s involved.
Get started, Colleen