Everything you do communicates what you really value, regardless of what you say you value. The key is the plan and the action.
Does your company have a living document for succession planning? Is it refreshed to take into consideration changes in market conditions or strategy?
Your succession plan should be in your startup business plan. It should be as bulletproof as possible, enabling business continuance in emergencies. Have you considered who can take over the reins if the CEO was to leave tomorrow? Succession Planning should be planned with two frames: A short-term emergency frame and a medium to long term plan.
Protect the value of your investment
The more you stay involved, the more you can protect the value of your investment. This may be the shares that you still own, the value of your earn-out or your vendor loan. You need to retain control if you have money on the table.
Take your time
If you are not selling out entirely (with all money up front), the choice of people you go into business with is paramount. Take your time. Be ruthless. Get an independent view. If they are employees, do psychometric testing and do your due diligence. If possible, have a get-out clause if it does not work out.
De-Risking your investment
Your succession plan may involve merging your business with another one. This may result in you owning a smaller piece of a larger pie. Often this is a great chance to de-risk your investment. But it makes it more important than ever to choose your partners wisely.
Tend to focus on "tangible"
As lawyers and accountants, we tend to focus on the tangible. This is usually money. But there may be things that are also important to you. This may include being the face of the company, having an office or another honorary role. These give you a sense of purpose after you transfer the business. Think of the Mad Butcher.
Succession Planning Leadership Transitioning and Business Continuance
Getting it wrong
- Not having a plan
- Frittering the money away
- Chasing the highest price
- Working for free
- Leaving it too late
- Selling in distress
Adding values by getting it right
- Money up front vs earn out
- Staying involved
- Choosing the right partners
- Smaller piece of a bigger pie
- Non- financial rewards
- Succession does not have to mean selling
- Everyone acts in their own self-interest
- Talk it over with your partner/family
- There are no ?tricks of the trade? ? success is built on good planning and execution ? this is hard work
- It will take longer and cost more than you think
- Be prepared to negotiate and compromise
- Have a plan B (the next best option)