Many companies have stopped using strategies to keep their businesses running after retirement.
There used to be a lot of safeguards for businesses, post-retirement, in the form of succession planning. But according to USA Today, 58% of business owners today don't have a succession plan.
So what is a succession plan and why should a business owner have one? Read on as we cover the basics and share some effective strategies for you and your business.
What Is a Succession Plan?
Succession planning was originally a process taken by the head of a family business to select and train a successor who would become the next leader of the company.
Having a succession plan is an excellent idea for many reasons, but none more important than preventing your lifetime of hard work that you spent building a company from going to waste.
In an ideal scenario, the successor will fill the critical roles in the company after a well-planned process that will prepare them with all of the necessary competencies to keep the business running properly.
However, one of the most common difficulties with businesses forming succession plans is that they lack the funds to train somebody to run the company and/or keep them on the payroll the entire time.
If you are currently nearing retirement, check out why you need a succession plan immediately.
So what are some effective strategies for an affordable and effective succession plan?
Succession Plan Examples
While there is no uniform succession plan that works for every business, finding what is best for your business and successor is the most important first step.
Whether you want the business to go to an existing employee, an outside resource, or maybe even a relative, there are a few strategies you can try.
- Career Development Programs
This can be an excellent method for ensuring proper succession. If you can afford it, we encourage you to send your employees to a career development program or some form of business education to learn and grow for the role.
As a bonus, these programs can also help with retaining employee engagement and satisfaction.
- Mentoring Programs
If you own a small business, are close to retirement, and have somebody in the family or company picked as your successor, you can mentor them in the business.
Teaching them the ins and outs of the business, giving them some hands-on work for practice, and leaving them with the business when you are confident in their abilities is a popular method for succession.
If you trust them and their abilities, they do not have to be compensated for this process if you are nearing retirement. The person being mentored must want to run the business for this to work.
These certainly aren't the only ways to plan succession for your business, but they are popular strategies.
While we went over a couple of popular strategies, check out these succession planning tips to learn more!
As MGA Partner Paul Grossbard share with us, “It doesn’t have to be so daunting. Simply pick a direction. And as the business develops and as your needs and wants and objectives evolve and change, so can that plan. It should be dynamic, like most of the planning that you do for your business.”
We’ve been there. We can help.
Let us help you set your company up for success so you can sit back and enjoy your retirement!