Choosing the Right Successor Business Owner: A Comprehensive Guide

Transferring the responsibility and legacy of your business to a capable successor is one of the most critical steps in any entrepreneur's journey. This process, known as succession planning, requires careful consideration and a deep understanding of the qualities that make a good successor. This article explores crucial aspects to consider when choosing a successor, as well as the implications of management and ownership succession in the business world.

Observing Potential Successors

The first step in identifying a suitable successor is to thoroughly assess their passion and commitment towards the business. A committed successor 'owns' the business mentally, approaches their tasks with enthusiasm, and therefore reduces stress while enhancing productivity.

A good successor perceives the business as their own, taking full responsibility for its success without the need for delegation. Their actions and decisions are personalized, driven by a deep-seated love for the business rather than merely seeing it as a means to an end.

When evaluating potential successors, it is essential to understand their long-term goals and ensure they align with the overall strategy and vision of the business. A capable successor will have a clear and well-crafted plan that doesn't just focus on their immediate interests but rather on the sustainable growth of the company.

Furthermore, a good successor is a strong leader, equipped with the skills to manage, organize, and control the business effectively. This leadership quality ensures that the business can continue to thrive and adapt to changing market conditions.

Management Succession Planning

Management succession within a business can be complex and time-consuming. It often requires a significant period of handover and training to develop a competent management team. While it is unlikely that a single employee will possess all the skills and experiences of the owner/manager, a well-planned transition can be achieved through a combined effort and continuous training.

Another aspect to consider is management succession, particularly when transferring shares to family members upon the owner's death. Drawing up a will with the assistance of a lawyer can simplify the process, but it is vital to ensure that the family members have the desire and capability to step into the management role. Sometimes, family members may prefer to take a step back or lack the necessary hands-on experience to manage the business effectively.

In cases where an external buyer is sought, the process can be even more complex and can take up to 12 months of due diligence. Identifying a buyer who can both afford to purchase the business and maintain its operational integrity is crucial. Trade purchasers, who are often competitors, may have a better understanding of the market and industry, but they may also pose a competitive threat to the current business.

Identifying a Suitable Successor

The identification of a suitable successor involves a process of observation and evaluation. As an entrepreneur, it is not just about finding someone who might fit the role but also about waiting for the right talent to come into your sight. The process often requires a keen eye and a systematic approach to filtering potential candidates.

A talent pool is defined by employees who demonstrate the following qualities:

Ambition: The driving force behind their desire to achieve business success. Honesty: Trustworthy and transparent in their actions and decisions. Skills: Proficiency in their work and the ability to contribute effectively to the business. High EQ: Emotional intelligence to manage and navigate interpersonal relationships and work under pressure. Toughness: Resilience and perseverance to face challenges and setbacks.

Assessing these qualities may involve evaluating 16 or more individuals to find one who meets the criteria. It is a statistically driven process that ensures you do not miss out on the right successor due to a superficial consideration.

By focusing on these aspects, you can make a more informed decision when it comes to identifying and grooming a successor. This will not only ensure the continuity of your business but also set it up for long-term success.