Small business owners who have decided to pursue an internal ownership transition often struggle with where to start. This blog is the fourth in a series of six designed to help small business owners ease into the transition process. In this article, we'll focus on how to identify potential successors in the internal transition process.
If you haven't already read the earlier blogs in our series, here are links and short descriptions:
Business Succession Planning in WV: The Key to Your Future, which provided an overview of business transition planning;
Defining Your Goals and Starting the Business Succession Planning Goals, which discussed defining your goals and developing a relationship with an experienced business succession planning attorney; and
Deciding on the Type of Business Ownership Transition: Internal, External, or Closure?, which gave an overview of the different types of business ownership transitions.
Begin to Identify Potential Successors
Owners have a strong sense of pride in the businesses they have built, often from the ground up. If your decision is to pursue an internal transition, you will need to identify potential successors well in advance.
Begin the process early enough to position yourself, your business, and potential candidates for success. Starting early allows you the time to groom and evaluate strong candidates who can take the reins when you are ready to retire or move to the next chapter in your life.
Factors to Consider as You Identify Potential Successors
When considering potential internal successors, there are many factors to think about. Certainly, a strong work ethic and solid performance are important. However, some of the qualities that are needed to run a successful business are not necessarily possessed even by your best employees. Try to identify potential successors with traits like these:
skill and reputation;
the ability to keep existing clients or customers and to bring in new ones;
important core values, such as a strong work ethic, integrity, and a belief in teamwork;
the ability to think critically and strategically; and
the ability to lead others.
In addition, remember that some potential candidates may not be interested in additional responsibility, stress, or financial risk. It is better to learn about these preferences early on, before you have invested valuable time and resources in a reluctant successor.
Grooming Potential Successors Using Performance Management
Remember that no candidate is likely to be a perfect fit. However, you can use your performance management and review process to evaluate and hone many of these essential skills and values in employees who show promise.
As with many issues in business succession planning, preparing potential candidates takes time. You can start by building leadership and entrepreneurship characteristics into your performance management system.
It is also helpful to open discussions with a business succession planning attorney who can assist you in identifying essential characteristics in potential successors. Experienced business attorneys with deep experience in succession planning can provide objective third-party input, helping you in the process of identifying potential successors.
You are most likely to identify potential successors when you start early and identify concrete succession planning goals. Get moving on your plan today: Contact me, Stephen J. Golder, by calling (866) 617-4736 or completing our firm's Contact form. I've helped dozens of business owners just like you successfully navigate business transitions, and I'd love to put my experience to work for you.