Succession Planning or beginning the transfer of a company from one generation to another is one of the most significant decisions you can make as a business owner. An unorganized transition, unclear roles/responsibilities, and not understanding financial drivers can turn a thriving company into a nightmare. Over 25 years ago, I went through one of these transitions personally, without planning, much training, or expectations of what would happen without my father’s experience and gut instincts. Here are seven things I wish I had known when starting the succession planning process.
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A solid team communication strategy
You have been driving and leading a company for many years, and your team knows how you operate. The younger generation does not have that luxury or experience. A clear understanding of who what does by when, and how you communicate (and drive meetings) with your key people will be critical to the next generation getting long-term buy-in from your management team and key employees.
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Document, document, document
There are many things that a business owner does from memory, especially when doing it for years. Start with an outline of critical processes or something you do during your day/week, and put them on paper. Then, prioritize those processes by importance and frequency of use and start documenting them so someone else can follow them.
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Know your financials
Not knowing a business’s financials (including cashflow) is akin to driving a race car with a dirty windshield. Make sure the next generation is fluent in the basics of financial management. Gross profit, net profit, cash flow forecasting & management are just a handful of areas where the successors should have a firm grasp.
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Track key metrics religiously
Not only will having key metrics (or KPIs) help the next-in-line steer the ship, but it will also act as an insurance policy for you to keep track of the health and condition of your construction or trade company. If you build lead and lag indicators into your tracking metrics, this will give you forewarning of impending issues or problems.
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Help them know your subs
As most successful builders have come to learn, your relationships with your subcontractors (especially your excellent ones) are critical to your business’s flow and keeping jobs on schedule. Make sure you introduce your heir apparent to your subs whenever you can, so they can build upon the relationships you have forged over the years of running your company.
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Check the ego at the door
Ensure that the next generation knows that respect is earned, not inherited. Understanding this concept got me through many hard times in my tenure owning and running the family business.
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Work from a simple, written plan
Working from a straightforward, written plan will be crucial to your construction or trade company’s ongoing success in your absence. Not creating a plan for your company is similar to doing a home remodel without construction drawings. You create a plan so that you and the next generation leaders are clear on the final product. In the same way that having a plan before you start a remodel makes sure you build what you intend, having the same for your business gives you the same results.
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The transfer of a company you have created through years of long hours of work, recessions, and overall hard work should be a careful and planned process.
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Following these tips will give the next generation some great tools to ensure their success and the legacy (and health) of what you worked so diligently to build.
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If you need help laying out a succession plan (and 2021 Business Plan of Actions) for your company, consider registering for a BPA that is included 100% with your HBA Member Benefits www.sbgpinc.com and clicking on Redeem My BPA.
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