There are thousands of successful small and medium size enterprises in Canada led by entrepreneurial founders. Many of those same founders would like to sell their business one day to benefit from their lifetime contributions and sacrifices.
Many founders have developed a strong identity for their firm, and would prefer that the employees they have mentored and trust continue the business after they have moved onto their next career or life chapter. However, surveys report that few of these founders have had the foresight to implement proper succession plans for themselves and their ownership interests early enough for such a scenario to be successful.
If you are a senior leader or majority owner in a privately-owned business without a succession system in place, you should be concerned, and here’s why: without a proper succession plan in place for you and the executive team, and a talent development strategy for the organization, your firm is likely to run into ownership transfer challenges in the future.
If you wait too long, you may not find the right leaders to take over the business, or you may be forced to accept a lower selling price than you could have achieved. Don’t think that a list of names on a table with ready dates is sufficient — a proper succession planning program is comprehensive, helps build the talent of future leaders over time, and stimulates ownership transfer as the next generation of leaders see a clear pathway to ownership.
This question of leadership transfer and succession has fascinated me for many years. Why were so many firms not comfortable with, or capable of, addressing the critical issue of succession? What could we learn from those firms that were successful in their leadership succession? I researched this subject with my coauthor Natalie Michael, and the outcome of our work is our book, titled Your CEO Succession Playbook: How to pass the torch so everyone wins.
The book guides CEOs/founders through the development of their unique succession roadmap following a six-phase process illustrated below.
For many leaders, getting started — 1. Plan for the Future — is a challenging step.
One of the first recommendations in our book is to start succession planning as soon as possible, and to link it to your longer-term business strategy. By doing so, you will identify future talent needs (and gaps in existing leaders) and create opportunities for emerging leaders to step up and lead by taking on key growth or operational initiatives.
The outcome will be a better leadership team of engaged people who are not only accountable for their work, but also who see opportunities for themselves and are willing and excited to participate in the ownership of the business. Under the right business conditions, as you sell down your majority equity stake, these new and engaged owners will grow the business, and your remaining equity will be worth the same or more than before.
Sometimes getting started is hard when the founder doesn’t know the end game and what she/he might do next after they completely transfer their ownership. We share a model in the book about getting through the four stages of letting go and moving on.
One key step to moving forward, according to the writer and other CEOs, is to create your own personal narrative about your next chapter. This is a challenging but highly rewarding exercise that will remove some uncertainty and allow you to step forward more confidently with succession planning for your business. Who knows, it might even motivate you to move more quickly.
I will be sharing more information about successful succession planning in an upcoming webinar hosted by the ESOP Association Canada March 1, at 3 pm EST.
To register, click here.
Brian Conlin is a former CEO, and now an executive coach and board member of businesses across North America. He advises firms on succession and coaches CEOs in transition, into new roles, throughout their leadership as CEOs, and out of their CEO role and onto their next chapter.
With Natalie Michael, Brian created Waterfront Partners Executive Coaching Ltd., a boutique coaching business focusing on CEO/founder and executive transitions.
From 1999 to 2015, Brian was President of the Canadian operation for Golder Associates, then their global CEO. This was a period of significant growth (grew to >$1B revenue) and organizational development. He can be reached at firstname.lastname@example.org.