Good to Great: How to Scale With an Outsourced CFO

Succession planning seems to be a blind spot for many organisations, especially for smaller, family-run businesses.

 

Not surprisingly, thinking about turning the reins over to a successor or purchaser can cause some anxiety. However, if you manage your succession planning wisely, your efforts will help you to improve your business now, even while you’re safeguarding it for the future.

 

In this post, we’ve put together six common succession planning problems, along with tips to help you overcome them. Let’s get started.

 

1. Ambiguity

In uncertain times, people generally want more, not less, guidance. That’s why a clear, well-defined succession plan is essential for a smooth transition.

 

Problem: The current succession plan includes Mike as a key leader, but because Mike has filled several different roles in the organisation, no one is sure which position is essential or which part he should fill.

 

Tip: Identify key, mission-critical positions in your succession plan. People come and go. Avoid confusion by emphasising positions, not people.

 

2. Procrastination

If something happens to you or another key person and you don’t have a plan in place, your business could crumble very quickly. Think of succession planning as a way to buoy up your business and make it even stronger.

 

Problem: Jan knows her business needs a succession plan, but she doesn’t have time to face the complicated tax, personnel and legal issues involved.

 

Tip: Bring in outside help to coordinate all the complicated factors associated with succession planning. Keep focusing on your business while experts help you formulate a gratifying plan.

 

 

3. The “Like Me” Bias

Leaders tend to search for successors who resemble themselves. Men tend to pick men; women tend to choose women; scientists tend to pick scientists; and so forth. The problem with the “like me” bias is that you might overlook the talent your business needs because certain people don’t fit your mould.

 

Problem: Try as he might, Kevin can’t pin down a suitable successor for his business. Each candidate he considers seems to have a disqualifying flaw.

 

Tip: Write up a description of the characteristics and skills a person would need to fill the position effectively. Then search for candidates based on attributes. You might be surprised by which candidates rise to the top.

 

4. Lack of Strategy

If you approach succession planning the way you approach your daily to-do list, you might end up with a plan that seems to have all the right parts but lacks a cohesive, overall strategy.

 

Problem: Jackie spent a great deal of time creating a succession plan two years ago. Today, when she looks through her program, she feels that it won’t help her business to reach its goals.

 

Tip: Start your succession planning with your goals as the highest priority, and make sure every part of your succession plan lends itself to this goal.

 

5. Hypothetical Valuation

Many people think that since the actual succession won’t take place for several (or many) years, there’s no point in getting the business valued now. The truth is, however, that it’s challenging to make decisions regarding the succession plan without a current and accurate business valuation.

 

Problem: Julie would be an excellent successor for your business, and you’ve begun to talk with her about a potential transition. She asks if you would be interested in a buyout, and the idea is appealing. However, you have no idea what the business is worth.

 

Tip: Before you start discussing the sale or turnover of your business, secure a valuation from an accountant with valuation credentials. You’ll have more control and secure data on which to base decisions.

 

6. Lack of Updates

Once you’ve finished your succession planning, you’ll need to revisit it every few years. Personnel changes, industry transitions and market conditions all contribute to needs for updates to your succession plan.

 

Problem: Hank’s widow is relieved to find that her husband created a succession plan for his business, but she soon discovers that the plan is fifteen years old and was created when the company was one-third the size it is now.

 

Tip: Review your succession plan regularly. Even if you don’t need to make significant changes, you will probably need to tweak it frequently.

 

For an objective outsider’s opinion on your succession plan, or to start a plan from scratch, talk with the business experts at Altus Financial. Wemar can help you with these common succession planning problems and any other challenges you encounter.