For many people, the creation of their business or enterprise is part of the legacy they wish to leave long after they have left this earth. They have put their heart and soul, passion, endless hours and personal resources into the creation and growth of this entity. Often times, they have spent lonely hours with the company when they would rather be with family, just to be successful, to have something sustainable and to create something they would be proud of, imparting a legacy to their family and community. But the reality is that someday they will not be able to continue doing that. When they are no longer able to, how do they ensure the legitimacy of the legacy? Succession planning is one way this can be achieved.
What is Succession Planning?
Succession planning is the active process of strategically planning for and identifying and developing internal people with the potential to fill key business leadership positions in the company. Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Part of succession plans focus on the transition of staffing as the demographics of a company change – focusing on how to maintain corporate knowledge in an environment when many are seeking to retire at a similar time. By being strategic in the hiring and mentoring of staff, a company is able to identify the characteristics and personalities of people they would like to become a longstanding, integral member of the company.
Many accounting firms that provide a full spectrum of business related accounting, finance and business management services, will work with companies to help them realize their needs as they apply to succession planning. Every business, due to its uniqueness, will have different needs as it applies to succession planning and a good accounting firm can ensure a streamlined personal approach is taken to the planning. A good business management or accounting firm will be able to help a company look at the big picture, to balance the internal with external factors – they will look at the demographics of the business, how it is naturally evolving, where the company or business owner wishes to evolve and will then be strategic in how it looks at succession planning. The said firms will explain the different approach of small businesses or partnerships to that of companies with many owners or stakeholders. They will identify tools such as life insurance policies to protect partners, will engage in discussions about financial and other risk management considerations, etc.
Following are some of the key reasons for succession planning:
• We rely on our staff at all levels of our organization to carry out our mission, stay true to our values, provide services and continue to maintain the reputation of our company. We need to think about how to ensure the continuity of this by maintaining the key personnel.
• Demographics in companies are changing quickly in this era of baby boomers looking to retire – this is expected to have a major impact on the work force and companies need to be in a place to not be impacted by the loss of staff through retirement. Being strategic in succession planning will create an environment of recruitment and retention that will fill any future gaps.
Careful, strategic and aggressive succession planning today will ensure the stability of your company in the future.
Miller Kaplan is a leading CPA providing tax preparation, business management and consulting services, including licensing and royalty audits, 401k plans, trademarks, financial and succession planning for high net worth clients, family offices, healthcare, entertainment, real estates, food and beverage industries. For more information on succession planning, visit Wikipedia.org.