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The desire of being an entrepreneur naturally comes with you wanting your business to be successful and remain that way. When transferring business power through succession from your generation to the next poses some risk but it can be successful if done properly.
Creating a successful succession allows a business to continuously thrive despite who steers the management or owns it. Older employees will expect the same loyalty, security and stability they have been receiving, and newer employees will expect growth opportunities, equity and transparency pertaining to their roles. If conditions decrease following succession, a decrease in the workforce would follow suit.
- Just as with any department in the company, a succession management team must be in place to train the next leader and structure the management that will follow. This team should also include people who know the company’s objectives and goals so that they are continued, despite who is in power.
- The transfer of power must be timed so that the transition is smoother, and the successor is welcomed by the responsibility that will follow. This could be a few months before the owner retires, or, in the case where the prospective successor already has a key role in the company, years.
- Although the existing roles may be clear among management, an ownership structure will ensure that these roles are not neglected or changed for the sole benefit of a successor. This structure will outline how each owner will benefit, be compensated and how much ownership they have in the company.
Before transferring the power of your company, make sure you feel confident about your chosen successor, that the company is financially stable to ensure a smooth transition, whether you will continue to be involved in the company in any way, and whether a contingency plan is in place should hiccups occur.
This article is a general information sheet and should not be used or relied upon as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)