Succession Planning 101: When to Start?

As of 2024, studies reveal that only 30% of small business owners have a formal succession plan, leaving a vast majority unprepared for future transitions. Among family-owned businesses, 61% lack a written plan, underscoring the need for proactive succession strategies. With over two-thirds of owners planning to retire in the near future, the absence of succession planning could lead to business closures and economic disruptions in local communities.

This is just one example of why it’s never too early to begin building a succession plan; the rule of thumb is no less than five years. At the point many realize they need a succession plan, it’s probably already too late. Don’t fall into that category! Check out our Comprehensive Guide to Succession Planning to learn more.

The ideal time to start succession planning is when your business is starting to take off. You want to protect all the heart and soul (not to mention, money and resources) that you put into your company, yes? It is possible to safeguard your business without it being an overwhelming process.

If you’re ready to dive into the process wholeheartedly, stop here and go read this blog instead, which offers 5 get-started steps for succession planning. If you’re just beginning to familiarize yourself with succession planning and aren’t ready to dive that deep yet, keep reading.

Succession planning focuses on having the right people and financial structure in place so that the value of your business will continue to increase for many years down the road. Ask yourself: who are the 1 or 2 successors that could fit into the most critical job positions in the future? Do they have the skills and experience necessary to be successful? Are they experienced in many aspects of the business and respected by colleagues, clients and business partners?

As you’re thinking about possible successors and positions, you should create a success profile for each position. This includes documenting the skills, abilities and behaviors needed to be successful in a specific role. Once you have that, compare the individual to the success profile and you can identify what assets they have and what deficiencies there are, and then later you can create a development plan to ensure that person is successful in that role going forward.

Starting to warm up to the succession planning concept? A great next step is to check out this useful pre-succession planning checklist that offers organizational and pre-planning tasks that will help ease you into the process without being too overwhelming.

The best thing you can do for your company is to start the succession planning process now. Don’t put your business, the financial lives of your employees, or your personal financial situation at risk. Instead, take the time well in advance to plan out a thoughtful business ownership succession plan.

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