Starting a succession plan early has many benefits, but it is tempting to push succession planning off until later. If you need the motivation, it can help to view a succession plan as a profitable business investment. Here are five ways that starting your succession plan early can create profit, both now and in the future.
1. Reduces transition costs
The most obvious way that business transitions cost money is the transition process itself. There are costs associated with accountants and lawyers during the sale of a business, which can quickly add up. This is where having a succession plan can be helpful — much of the work that goes into selling a business can be done or organized long before the actual transition occurs. This means less time with accountants or lawyers is needed to prepare for the sale and transition, which can save some money for you and your business. To read more about reducing transition costs, read our previous blog post.
2. Reveals gaps
When a business has been operating smoothly for a significant period, it can be easy to miss any gaps that may exist in. Some aspects of your day-to-day operations may be utilizing shortcuts that make tasks easier, but may be confusing to anyone new to that role or task. Spending time to make a thorough succession plan allows you to identify where these knowledge gaps might be for future owners and employees, and come up with ways to bridge these gaps. This can ensure that tasks are always completed efficiently and effectively, which can maximize profit.
3. Creates structure for training
This ties into finding gaps — once the gaps are identified, it is easier to determine how these vulnerabilities can be avoided through appropriate staff training. Potential solutions may include creating standard operating procedures documents, or ensuring that there is an appropriate training period for new employees. This can improve the confidence of staff members as they complete tasks at work, leading to improved staff morale and work quality.
4. Improves employee morale
Beyond improving staff morale while still working for the original owner, having a formal succession plan in place can provide a sense of security for employees. Knowing that there is a plan in place in case of unforeseen circumstances can provide an employee with greater encouragement to stay at the business for a longer period as their employment is much more secure. Having key staff members stick around long term (especially during a business transition) provides consistency of products and/or services, which keeps long-term customers satisfied.
5. Allows you to focus on long-term business goals
When a formal succession plan is in place, the business owner can better focus on long-term goals for the business because those plans can be carried out with greater certainty regardless of who is in charge of the business. Whether those plans include new products/services or expanding into new markets, more resources can be focused on following through with these goals.
Succession planning isn’t just smart – it is profitable. It ensures you are actually ready for a transition and positioned to get a higher price from the sale. Plan earlier and see greater benefits in the long run!