You’ve been warned of the dangers of not having a well defined succession plan. The potential problems run the gamut from family conflict to negative tax ramifications, to financial security issues putting your legacy at risk.
If you do have a succession plan in place, you’re in the minority of business owners that have taken the initiative to plan for a day when you exit the business (and it is a question of when, not if). A recent survey by Korn/Ferry Institute found only 35% of companies are prepared for the departures of their CEOs.
So if succession planning is so important, why are so many business owners avoiding it?
Entrepreneurs are risk takers by nature. If you’re one, you know what I mean. But they don’t take unnecessary risks, and they don’t like to miss an opportunity. I believe this in part explains why many haven’t defined or attacked their succession plan. Many fear sacrificing control and by putting a plan on paper for departure, it can seem like you're giving up the ability to change with new opportunities.
Failure to prepare for a change in leadership can be enormously damaging to your business. You want to give your people and your customers the peace of mind in knowing that there is a plan in place if the CEO has to step out, whether planned or unplanned.
Even Steve Jobs is avoiding it…
A high profile example of the importance of succession planning comes from Apple. When the press got wind that Steve Jobs was taking medical leave in January, the company’s stock dropped overnight to a one-year low. With no clear successor, Apple shareholders feared for the direction and stability of the company.
While you may not have clamoring shareholders to answer to, you likely have relationships with valuable customers that need to be managed. Internal perceptions and emotions also need to be considered in the succession planning process.
Take steps now
Many leaders tend to procrastinate on their succession planning because they fear they’ll get “boxed in" and won’t be able to make changes to pursue new options as their business changes and grows. The best succession plans provide flexibility and a variety of alternatives for owners that realize the business they own today will not be the business of tomorrow.