Nationwide is currently offering a series on Leadership. The course is called “Leaders at Every Level” and one of the components of this series is a study of Stephen Covey’s The 7 Habits of Highly Effective People. Habit #2 is “Begin with the End in Mind,” which leads me to my current topic of Succession Planning. Succession Planning is just that, where do you see yourself in 15-20 years?
“To begin with the end in mind means to start with a clear understanding of your destination. It means to know where you are going so that you better understand where you are now and so that the steps you take are always in the right direction.” – The 7 Habits of Highly Effective People
Important Considerations for Creating a Succession Plan
In realty, a Succession Plan should be a part of your business plan. Too often the business plan is based on starting the business and maybe a three-to-five-year vision. In most cases the exit strategy is never integrated. But it should be — “Begin with the End in Mind.”
There are many steps that should be taken as you plan your strategy. What you don’t want to do is set an artificial date and realize, when that date hits, you are no more in a position to retire than you were 15 years ago. How many times have you said, “I’ll retire in five years,” then that five years comes and you say five more?
Have you asked all the right questions?
- Do you have a management/leadership team in place to run the business?
- Is the business worth what you think it is?
- Do you have an exit team in place?
- Are you going to transition internally, or do you want to sell externally to a third party?
- Have you considered all the tax consequences?
These are just a few of the many steps you need to consider.
The Best Path for Succession: Internal Transaction
Statistically, 70 percent of the owner’s wealth is tied up in the business. You must be able to get your money out of the business. Just because you have worked the business 60 hours a week for the last 20 years doesn’t mean the company is worth $XXX+. Plus, only two out of every 10 businesses that go on the market have a transaction. The best path is an internal transaction based on the company you have built with the leadership/management you have trained, mentored and coached for the day when you are ready to exit.
Why You Should Start Succession Planning Now
The key takeaway is that you must start the process now. Wherever you are on the journey, start now. Your number one focus must be on creating your team that can take over the business when you are ready to retire. Remember, you don’t need to do it all at one time. It can be a gradual process with you keeping controlling interest.
You may have created a business plan at some point of your business journey, this is just an extension of that plan that takes you all the way to the end. Start your Succession Plan today!
Begin with the End in Mind!
