Succession planning for small business

Succession Planning is important for everyone. But perhaps especially for small businesses. You might not think your business is a high-risk one, but when it comes to succession for small business and sales, it can be considered so!

But why?

Small business, by nature, have few staff members. That makes for a lovely, close knit team, and often makes communication easy. But what would happen if you lost one of your principals? What would happen then? Principals in small businesses are very important– more important than those in large businesses. They often carry knowledge that few other people have– of dealings with clients, of business history, or business finances. It’s like the old saying: putting too many eggs in the one basket. Even in a close team, that transfer of knowledge can be lost. Unless you formally plan for it. That’s what a succession plan does: it provisions for this transfer of knowledge to be both gradual and comprehensive. It’s also important where there might be skills that the successor lacks, and training is necessary. A succession plan identifies what needs to be done, and makes it happen.

Another reason that succession planning is especially important for small business is that they tend to have quite a narrow marketplace. They tend to do one thing, and do that one thing very well. Businesses with more diverse interests tend to sell for higher prices just by virtue of that fact. So, businesses with singular interests need to plan methods of increasing their value. It can take a while to do this: it’s never an overnight thing! Working out value maximisation strategies with a succession planner might not take very long, but these strategies are often for the long term and cannot be implemented in a matter of weeks or months.

Finding someone to acquire your small business is also a bit of a long process. Finding the perfect partner is important– not just choosing someone who will pay the most. What about your brand reputation? Small businesses foster and create very strong relationships with their clients, and so it is important that you pick someone who will not betray or ignore these relationships. It really is a delicate process, and you need a strong succession plan to guide you through it.