Thinking about succession events in your business? Be prepared and avoid the common reasons why succession planning fails.
This article is published by Modoras Accounting (QLD) Pty Ltd V11022019
Reasons Why your Succession Planning Might Fail
Succession planning prepares your business for the future and is something that every business should have. When you decide that you would like to retire, move on or sell your business, or if you’re replacing key personnel, having a succession plan in place streamlines the process for all involved. And if it’s well thought out, it can take away a lot of stress that happens when a succession event occurs.
During the succession planning process, there are a number of common pitfalls that can be avoided with the proper guidance. Let’s take a look at some of the reasons why succession planning fails and how you can prevent this happening in your business.
Business owners and executives leaving it too late
It’s vitally important to prepare as early as possible for succession events in your business. A succession plan should ideally be in place long before it’s needed. It’s incredibly common for many business owners to only consider developing a succession plan when they need to sell (or retire) or they’re facing the departure of key personnel.
By beginning the process early, it allows for a more considered approach and gives you time to consult experienced advisors where required. A minimum of two years is preferable if there is a pending retirement or other significant change that is expected to occur within the business.
As employee movements within the business also occur, the succession plan will need to be reviewed at consistent intervals. This will ensure it still meets business goals and the current experience and leadership within all levels of the business.
Lack of support from all owners/executives
Another difficulty that many businesses face during the succession planning process is not having all key decision makers on board. Developing and implementing a succession plan requires careful consideration from all owners, executives and decision makers within the business. Every person involved can see things from a different perspective, so it’s crucial to have the support of these key personnel. Together with the assistance of your accountant or business advisor, your business will then be in a much better position with a more robust succession plan.
Choosing unsuitable successors
There are many considerations when looking at potential successors to move into a more senior role within your business, or eventually take over as a director.
When identifying potential successors for your business, it can be easy to make assumptions about those employees who are being considered. From their skills and abilities to their interests, it can be easy to assume that if they don’t fit into your ideal mould, that they aren’t suitable. The reverse also applies. It’s also important to remember that just because employees are good at their current job, their skills may not crossover in a leadership role.
Lack of training for potential successors
Some employees may show talent in their current role and have the knowledge and expertise but haven’t had much (if any) leadership experience. With the right training, mentoring or coaching they can develop their leadership skills and capabilities. Being a great leader takes time and is something that needs to be continually worked on.
Ongoing training for potential successors can have a positive impact on your succession plan and your overall business. A suitable training or mentoring program is a key element of any succession plan and allows potential successors to continue to grow personally and professionally.
Succession planning for business success
Your business can avoid many of the common reasons why succession planning fails by carefully working through the planning process and seeking advice for any complex parts of the process. By developing a succession plan well before it’s required, you will give your business the best chance of success.
If you need help with developing a succession plan for your business, or reviewing your existing plan, then please get in touch with our qualified team of advisors today on 1300 888 803.
IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual's personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.
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