Why Is Succession Planning Important?
Written by Pete Benson, Co-founder of Beacon.
Unfortunately, all good things must come to an end: Your favorite TV series, a bowl of ice cream, your time overseeing your business—and that last one is important to plan for. As a business owner, if something happens to you, you need something in place to ensure leadership can change quickly and smoothly. That’s where succession planning comes in.
What is Succession Planning?
Succession planning is a process to ensure your company is adequately prepared for the future and a change in leadership.
Creating a succession plan is part of being a wise leader and protecting your company, whether you are physically present for the business or not. Starting this process may feel daunting, but the sooner you get to work on your own plan, the sooner your business is well-prepared for whatever is to come.
What’s Included in a Succession Plan?
Your succession plan may include:
- A clear outline of where the organization is currently, where it should be in the near future, and where you want it to go in years to come
- A list of key positions and how to fill them if vacant
- Strategic training and development for your team members
- A life insurance policy naming a business partner as the beneficiary
Take some time to think about the key roles in your company. For each position, ask yourself:
- What is the day-to-day impact of this role?
- If the person currently in the role was suddenly gone, how would that affect our operations?
Include those answers within your succession plan. For a closer look at which details to include in your succession plan—including how to choose a successor—read our article on Estate Planning for Small Business Owners.
Why Succession Planning is Important to Your Success
Having a succession plan in place proves your commitment to the business and gives your employees confidence in the stability of the company. Plus, implementing a plan on the front end—rather than making everyone play catch-up during a crisis—saves time and money in four major ways:
- Your team won’t have to “hurry up” and gain your knowledge (an impossible feat, anyway)
- There won’t be a frantic, uninformed search for qualified candidates to replace you or someone else
- The brand can be preserved throughout any necessary transitions
- It can save your shares of the business from going through probate court
So, you can either plan well for a smooth succession plan, or you can leave it to chance and it may result in disaster. Studies have shown that when the business founder dies, the whole company takes a hit: Sales drop, staff scrambles to keep the wheels on the bus, and many organizations don’t survive. I don’t know a single business owner who could find much comfort in that scenario! After all, this is about your peace of mind, too.
Preparing Your Successor
Don’t be afraid to start implementing pieces of your succession plan now. In fact, it would be wise to start preparing your potential successor(s) for their advancement as soon as possible. This includes sharing your vision with them, training them, and having them fill in as a trial run. This way the candidate(s) will gain valuable experience ahead of time, and it also allows you to assess areas where they might need some additional development.
Our Succession Planning at Beacon
We believe a succession plan should be a living, breathing strategy that can be changed and tweaked as you grow. Here at Beacon, my business partner, Jon Maxson, and I implemented a succession plan many years ago. As life and circumstances have changed, we’ve made course corrections along the way. Who knows—there could be many more changes to come along. It’s okay to change plans; what’s not okay is not planning.
If you need someone to talk to about your small business, your estate planning options, your legacy, or your overall financial plan—give our firm a call. Beacon Capital Management is a full-service wealth management firm that takes a comprehensive approach to financial planning. We want to help you cover the most important areas of your life.You can also take a deeper dive into Estate Planning for Small Business Owners in our guide below: