The Importance of Business Succession Planning
If you are a business owner, you probably have an idea of what your company will look like in five years. But, what about in 10 years or 20 years? Will you still be in charge of the day-to-day operations or will you have handed the reins over to a successor—possibly even your own child or another member of your family. Assuming that you do not sell or close your business, you will, at some point, need to consider who you want stepping into your shoes as driving force behind the company’s success. You will also need to train that person and get him or her ready to take your business into the future.
Succession planning is an important consideration for any business, including the largest and most successful companies in the world. Let’s take a look at a recent, well-known example:
Big Changes for a Big Company
Last month, the founder of Amazon surprised many people by announcing that he would be stepping down as CEO of the mega-retailer. Jeff Bezos founded Amazon as an online bookstore in 1994 and then guided the company’s growth in the monolith that is has become today. Valued at more $1.6 trillion now, Amazon has emerged as a major player in a wide range of categories such a household goods, groceries, streaming video, and webhosting services. In fact, the Amazon Web Services (AWS) division reportedly drives a substantial portion of the company’s annual profit and currently accounts for more than half of Amazon’s operating revenue.
In his announcement, Bezos stated that, as of the third quarter of 2021, he will, “transition to Executive Chair of the Amazon Board, and Andy Jassy will become CEO.” Jassy has been a part of Amazon since 1997, and he has headed up the AWS cloud computing team since its inception in 2006. While Bezos’s succession plans were kept largely quiet until the announcement, company officials indicated that the decision was made with input from the company’s board of directors.
Making Your Succession Plans
As you consider your own company’s future, it is possible that you already have a specific person in mind to take over control of your company down the road. If that person is your son or daughter, you may have had your successor in mind the day that you opened your doors. On the other hand, one of your employees may have impressed you to the point that you could see him or her taking over for you eventually. No matter who you choose, it is up to you to determine that the person is capable of not only running a business but running your specific business.
Your existing client-base is potentially a valuable resource for gathering feedback about potential candidates. This is especially true if your clients have interacted extensively with those whom you are considering. How your customers react to your choice of successor is important, because you will need your customers’ continued support during the transition.
You should also talk directly with your candidates before you make any decisions. Doing so will help you gain perspective and an understanding of what they have in mind for their own future. If the person you want to run your business simply is not interested in being in charge, you will need to go a different route.
Development and Training
The person you select a successor will not be ready to take over tomorrow. It will take time. In the meantime, you need to be clear with that person and your team about your intentions and your target timeframe. From there, you will need to be organized in your approach to developing your successor. Work closely with him or her to ensure that the necessary habits and skills are being learned. You must also take care not to overwhelm your successor. If he or she burns out before even taking over, your company could suffer greatly.
As training and development moves along, your successor should need less and less oversight. This is a good thing. Ultimately, he or she will be running the business without you, so you need to know that your company is good hands. If your successor is having trouble with acting independently, you may be forced to rethink your decision.
Call Us for Help
If you would like to learn more about business succession planning, contact one of our experienced Naperville business law attorneys. The skilled team at the Gierach Law Firm can provide guidance as you look to secure the future of your company. Call 630-756-1160 for a confidential consultation. You can also click or tap here to check out our YouTube channel where we have additional resources regarding business succession planning.