We all know that an approaching retirement date can be equal parts exciting and overwhelming. You have looked forward to this moment for so long, and now that it’s approaching, it’s natural to feel overwhelmed.
The complications involving retirement increase dramatically when you’re retiring from your own business. Your biggest responsibility will be to name and train a successor. After that, you must develop a sound business plan, which will require consultation with someone experienced in the process. Just as you are an expert in your business, there are people who handle succession planning exclusively. These professionals work to ensure both your success and the success of the business you’ve worked so hard to build.
If your plan is to pass the business off to the next generation, you should be aware that less than one third of businesses successfully transition to the next generation. But don’t be disheartened; there are ways that you can prepare yourself, and your successor, for success.
4 tips for success:
- Don‘t assume. This conversation should happen early, and often. The child you considered your protégé could be pursuing a different career. Conversely, you may discover another to be a shrewd business person, ready to rise to the challenge.
- Develop a plan. After identifying your successor, develop a multi-year plan for transferring ownership. Make them earn the job by setting goals such as: conducting interviews for new staff openings, conducting informational interviews with seasoned employees, observing the payroll process, becoming a skilled money manager, etc.
- Communicate. Your business approach has paid off, and your company is proof of that, but the next generation will very likely have a different approach. You need to decide from the onset how you feel about a change in business strategy and communicate that with your successor.
- Skin in the game. Most experts agree that the successor should be financially invested in the business, just as you were when you started out. Many of the failures in succession planning stem from the next generation never having to struggle like the founding generation did. Having skin in the game, or a financial commitment, should positively correlate with their level of commitment.
At the end of the day, this isn’t just about handing over a business. It’s more than that. This is passing down your legacy to the people you motivated you to work so hard over all of these years. This is showing the next generation that, with hard work and commitment, you can pave your own path through life.
Protect your business by carefully mapping out its future.