Having a business means more than making money and selling stuff, it also means a having a vision and this vision must include business continuity. Be honest with yourself and try to answer the following question: How much time do you think that you will be able to run your own business? 10 years? 20 years? Maybe even 30 or more? What happens if you are no longer able to run the business?
This is why freeing up your day-to-day involvement in your business is vitally important. It allows you focus on only the important aspects of the business such as plan for future growth, investigate emerging opportunities, and seek out strategic business acquisitions.
Being freed from the daily mundane business decisions is only the first step. What happens when you no longer want to or are unable to continue to running the business? It’s never too late to start so start planning right now for a successor before that time comes.
Succession planning for small business owners is always difficult, mostly because you don’t have that many choices to begin with. Most successful entrepreneurs are made and not born. Thus, identifying a suitable candidate with potential entrepreneurial ability can be tough. If you have three or four possible candidates to choose from you should feel very lucky.
The change of mindset from employee to employer is quite dramatic even though you might not be fully aware of it. This is if you choose a successor from inside the company, which is strongly recommended. Having a person from within the organization ensures the person understands the operations and the business. Unless your business is a large multinational corporation, it’s unlikely you’ll be able to afford a highly paid professional CEO to take over. Grooming a person from the inside also encourages your team members to prove themselves.
Some business owners feel their son, daughter, or relative should take over to keep business within the family. While there is nothing wrong with selecting a family member, make sure the person you hand control of the business over to truly has the potential to take the business farther than you have. A business that doesn’t grow will die. Finding the most suitable candidate has more to do with ability rather than relation to the business owner. Understanding this one point is vital to getting a very talented individual to take over. After all, the hard work that went into building the business would be wasted if the person selected ended running the business into the ground.
The change of perspective and mindset can be overwhelming for some. This is why it is never too early to start training the next leader. The learning curve can be very difficult and you should always avoid making it too steep by taking your apprentice(s) and showing them the “ropes”. Choosing more than one candidate will keep every candidate motivated to prove themselves. The competition that results will enable you to select the best candidate.
What qualities should the potential successor have? Some basic qualities they must have include confidence, high level of integrity, natural leadership abilities, friendly yet firm, courageous, and a clear understanding of how to prioritize multiple tasks. A leader has the ability to see the big picture, make decisions quickly and have them acted upon. When everything is going smoothly these things are reasonably easy to achieve, but when things get rough and they will, a leader will truly be put to the test. To find out how good your potential successor really is put him or her to the test. Have them make tough choices and see how they respond. Some examples are “Who do you think I should fire? X or Y?” Watch their response time and ask them to justify their reasons. If you see repeated hesitation, start searching somewhere else. Good leaders make decisions quickly. If you see some dodgy answers like “I don’t see any reasons to fire any of them” ask for more explanation. If he answers with a question, he might actually have some potential. A true leader makes informed choices and never in haste.
Another way of testing your candidate’s abilities are with questions like “Who do you think that is the best successor for this company?” He or she will probably pause to reflect before you hear the answer. Ideally he or she will take every reasonable candidate and under the pretext of discussing their strengths and weakness, it can actually show your candidate’s weaknesses. Tact, clarity of thoughts, and ability to express them effectively are some of those skills that you will never see in a resume, but are absolutely crucial for the leader of a successful company.
Now that you have at least one possible candidate for the succession, it is wise to start working on changing the perspective from team player to team leader. This means assigning tasks which require planning and decision making. Take small steps and take everything they do subject to your evaluation without them knowing about it. They way they carry themselves is a sign of their confidence in handling their tasks. Observe how they handle pressure, different people and problems. Your candidates for succession should not get fazed by any of these.
You should never tell him or her that you have chosen until the very last moment. This way you keep them motivated. Your choices and assignments should make them hope, but never be absolutely certain.
This has been a simple guide to effective succession planning. By no means is this a complete guide nor was it meant to be. If you are still stuck in the day-to-day operations of the business, make sure to focus your energies on freeing up your time to work on strategic aspects of business growth first. If you are past that stage and have difficulties with the critically important decision of selected a successor, seek professional advice from a business coach. Having an outsider from your business keeps decisions you make about your potential candidate honest and objective helping clarify your decisions for your business.
Anthony Yap is a business coach and consultant to small to medium sized business owners who seek real-life methods to growing their business. He is a Master Team Builder, master marketer, and business process expert. Reprints of this article are permitted as long as links remain intact.