Succession Planning includes the preparation of People and Processes

The US has 3 million small businesses with owners over the age of 55. According to Project Equity this represents 32.1 million workers and $1.3 trillion in payroll. What will happen to these small businesses and workers?

• Will they retire and close the business?
• Will they sell the business?
• Will they promote someone from within the business to take over?
• Will they bring on a partner?

If you’re a small business owner considering the next chapter of your life, you may wonder similar questions.

I want to let Day Designer go because it’s bigger than me, and needs a team of people who can give it the best opportunity for the path that it’s on.

Whitney English

You may already be aware of the financial and legal steps required to move to the next chapter. However, two other parts position you for better leverage in these succession conversations.

• People
• Operations

You’ll know the strength of these two parts by how well your business can run without you. If you were to take a six-month sabbatical or medical leave, is your team able to sustain the business? This means taking care of existing clients and generating new revenue while keeping a positive cash flow. If they have to call you for input or emergencies, then we have work to do.

Developing People

Succession is more challenging when team development isn’t a common practice of your business. Plus, founder-focused companies are inherently more difficult to transition because the market has built a relationship with the founder versus the company and team. However, it can still be done.

• Everytime you delegate, you’re practicing for succession.
• Everytime you mentor someone to grow and take on more responsibility, you’re practicing for succession.
• Everytime you include someone else in promoting the brand and selling, you’re practicing for succession.

Review your team. Do you have the right people in the right seats to transition to the next chapter? The right people have the autonomy to make decisions on behalf of the business, take ownership of problems, are confident in their ability to figure things out, take educated risks, and work well with others.

Who are you mentoring and developing to step into your shoes? Do you trust them completely even when their decisions are different than yours? Do you allow them to fail forward and learn? This is necessary for them to be able to take risks to grow the business.

Be honest about who can take the business to the next level. It’s easy to choose a family member, most tenured employee, or loyal employee. But who is best for the business?

• How have they earned it?
• What added value do they create for the business?
• Do they have the respect of their peers and clients?

If you choose to bring on a partner, do they compliment your strengths? A yin to your yang for a stronger unified team.

A successful transition is one so smooth people will barely know the difference. And this happens when owners develop future leaders instead of task-takers. You’ll be able to see this because leaders have courage and initiative; task-takers need constant direction and reassurance.

Letting go of Cultivate meant letting go of living out my gifts in the ways I’d known for so long. It felt like a death.

Lara Casey

Operational Processes

Does your team know what to do and how to do it at a high level consistently? There are two common ways knowledge is shared in small business: word-of-mouth and automation.

The lack of documented processes hamstrings many business owners to keep senior employees who’ve outgrown their roles and business. As a result, performance stagnates and dysfunction occurs. To avoid this, create a culture where process creation and refinement is a team practice. This encourages business continuity where someone else can step in and continue to deliver the standard of work your business is known for.

Automation is the implementation of a process, but it doesn’t necessarily equate to having a process. What happens when automation breaks? Will you notice? Or will it take a client to bring it to your attention? To avoid this, document each step of the automation. An easy way to start is to use Loom to record each step and narrate what is happening and why. You can then use the transcript as the outline for your process.

A well-defined process tells the how and why. It can be executed manually and transferred to another platform. Especially, important as many workflow automations run on rented software (SaaS) instead of owned platforms.

a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus’s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. … Taking a process approach implies adopting the customer’s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.

– Davenport 1993

The collection of your brand assets, digital assets, processes, templates, and designs makes up your company’s intellectual property. Their value can be included in negotiations depending on the terms.

Well documented processes make your company more appealing for a buyer or partner. It sets them up for a successful transition. When you’re ready to determine value, I recommend you consult an attorney.

Planning Ahead

None of us know what the future holds, but you can set yourself and your business up for an easier transition when the time comes by developing your team and documenting your processes today.

If you have a time frame in mind, start by selecting a date. I recommend the 1st of the year or 1st of the quarter making it easier to align with the many parts of succession planning. Then work backward by identifying what you need to do, how long it will take, and when it needs to be completed. Let’s say you want to move to your next chapter by March 1st, 2026.

• When do you need to find a successor?
• What qualities must they have?
• What’s your role in the new chapter? What’s their role?
• Will they be internal or external?
• If they’re internal, when will they be ready to succeed you?
• How will you determine they’re ready?

If this seems overwhelming, start by flushing out all your thoughts on paper. This makes it easier to start mapping them out and placing them in order. If you need support mapping it out or developing a successor, let’s chat!

Additional Resources

• Book // Built to Sell (*affiliate link)
• Journal of Accountancy // Benefits of ESOP in Succession Planning