Succession planning as a key strategy for SMB survival

| November 6, 2019

One strategy SMBs overlook too frequently is succession planning. Who should take over the reins if you decide to step down or in the case of your untimely demise? What happens to your management structure in the future, one or two generations later? Is there something of a management legacy you’d like your future business owners to uphold? All of these and many other questions are answered precisely with the right succession strategy. Here are a few methods to create one that will preserve your business for generations to come. 

Create the right instructions and objectives

No succession can go without a setback or two, but it would completely collapse if you were to suddenly abandon your post and leave it all to others to handle. That is why your succession strategy needs to contain direct, step-by-step instructions to guide your key heir and other future key figures in your company. This is particularly vital for family-owned and operated companies to avoid conflicts and prevent further issues. 

In addition to creating the right mission and vision for the future of your company, make sure that your instruction manual is a detailed one and that it outlines each role that needs to be filled once you’re out of the picture. From handling finances to managing client relationships, the heir to your throne should be able to take over the business at least partially seamlessly to avoid major losses.

Fund the succession properly

The make-up of the Australian SME business market is largely in favour of families. To be more specific, around 70% of Australian SMBs are family-owned, which naturally predefines the succession line in most situations. Even if this means that you have identified your successor with ease, it also means that you need to facilitate the transition financially in a way that will not jeopardize the business or deter the successor from taking over your company. 

One of the finest ways to ensure financial stability during succession is life insurance. To move forward, you can explore the right life insurance policies that will enable you to ensure financial stability to your successors in case of your demise. They will both be able to run the company smoothly as they handle the transition, or they would be able to avoid losing their family collateral by paying the business loan with life insurance. In any scenario, investing in a policy can protect your investment and your family when they inherit the business.

Come back to your plan over the years

Even after decades of successfully operating a company, any business owner knows that most decisions can change with the tides. Perhaps you’ve taken on a new partner in the meantime, or your family has decided to split the ownership when you step down. There are other scenarios that can also lead to colliding interests, conflicts, and complications, hence the need for contingencies.

Whenever your business goes through a major change that can affect its long-term success, make sure to go back to your succession strategy, revise it and refine it when necessary. It needs to be relevant to your company and to the time when it is set into motion. 

It may seem early yet to plan for your retirement if you’ve just spread your wings in the small business world, but thinking about the future of your business is one of the hallmarks of successful brands that will outlive their inventors. Use these tips to create a viable succession strategy and give your brand a future it deserves.