Get started with business succession planning

Succession planning to plan role transitions and exit strategies necessary for all businesses.

LAYING THE GROUNDWORK

What is business succession planning?

Most contractors understand the grind; Day in and day out, they're at the heart of every task, big or small. But this begs the question, "Do you own your business, or is your business owning you?"

Succession is not just about passing the baton; it's about preparing to give someone else the roles and responsibilities you have held onto for years.

When contractors transition from being hands-on in every project to overseeing operations, they're not only succession planning but reclaiming their time. Successful exits require a team. The team consists of a financial advisor, an attorney, an accountant, and a business coach.

Begin succession and exit planning when you start your business, not just as you approach retirement. After all, your journey doesn't conclude with "retirement." A vision of a future beyond your current company motivates proper exit planning and fuels your aspirations for the next venture. In essence, you need to know your numbers and how much money you will need to enjoy the years of retirement ahead of you.

Business ownership vs. being owned

Exit planning includes your beyond retirement vision

Assemble a robust succession team

what is a business coach for contractors

DOCUMENT, TRAIN, & RECLAIM TIME

Creating a “playbook”

Contractors often find themselves chained to their businesses, feeling the burden of every role from “janitor” to “salesperson.” To break free from this, create a tailored playbook for every task and position in your company.

Contractors can align teams with best practices by methodically documenting procedures and training staff. This approach goes beyond scribbled notes - consider videos, audio, and hands-on training to impart knowledge effectively. After training, ask for feedback from the trainee to gauge their understanding. This feedback loop helps measure their retention and allows course correcting as needed.

To ensure a smooth transition, review every function you still perform, determine who should take over each one, document procedures, train employees, and repeat until all responsibilities are handed off. Comprehensive playbooks for the entire business and each role are important references for sustaining success.

READY YOUR BUSINESS

Building a solid foundation before succession

Before beginning succession planning, it's essential first to fortify the current state of your business. With the right preparation and foresight, proper succession planning allows contractors to avoid common pitfalls and ensure the continuity of their life's work. The business remains a valued asset supporting the family legacy rather than a burden keeping its owner chained down.

Prioritize Business Health

A common misstep of contractors is neglecting the current state of their business while focusing all efforts on succession planning. It is essential to ensure that the tools, technology, and physical facilities (if there is a brick-and-mortar location) are in prime condition before handing off control. This updating enables a much smoother transition process.

Bring Business Up to Date

Evaluate the relevance of current software systems, the functionality and appearance of the physical workspace(s), and any ongoing maintenance needs. Outdated technology or shabby facilities will take away from daily operations, and lower the business's valuation and appeal to potential future successors or buyers. Investing time and resources into bringing these elements up to date will pay dividends in the long run.

Appointing a General Manager

Appointing a general manager before succession is also a pivotal move. This person will take on important decision-making, strategy, and leadership responsibilities. Having a competent GM already integrated into the business ensures a confident changing of the guard when the time comes. They will already have established knowledge and rapport to steer the company forward.

Succession and exit: Navigating the pitfalls

It's crucial to recognize the importance of planning. Before even considering an exit, one should ensure a strong succession plan is in place. This means implementing robust systems, hiring the best personnel, and providing them with thorough training. Moreover, having clean and impressive financial reports is paramount, as they significantly influence the valuation of your business during a sale.

Here are some key takeaways to remember when navigating succession planning and exit:

Succession planning involves the daily transition of responsibilities and leadership, while exit planning focuses on eventually stepping away permanently. Proper succession planning comes before exit planning.
While succession is often seen as more critical for large corporations, even modest mom-and-pop small businesses with just a few employees can benefit from proactively thinking through how their company will continue after the owner's departure.
Business owners often make the mistake of not building a dependable team of advisors before their succession and exit, leading to chaos. You need a team in place early on - financial, legal, accounting, and business advisors - to help steer through succession and exit smoothly.

In short, plan ahead, get a good team together, and make sure your business is set up to run well, even after you step back.

USING A BUSINESS COACH

Decide which strategy is right for you

A business coach can be invaluable in objectively evaluating all the options and deciding the best succession plan out of the three common options available for your situation - whether that entails a family business succession planning, selling to an outside buyer, employee promotion, or even closing up shop.

Closing it down - Closing your business is the least attractive way to exit. It's more complicated than it sounds and can be painful. We don't recommend it, but it is an option.
Passing it to a family member - This is often one of the most ideal choices because you can feel good knowing your hard work and legacy will continue. However, it’s important to maintain the best state for your business and find someone you trust and is a good fit for the position.
Selling - It’s crucial to ensure everything is in proper condition for selling if you decide to do so. Anything less than optimal can make it difficult to deal with, and you will have a harder time getting the value you’re hoping for.

Keep in mind you should have multiple possible exit strategies. Selling your business might not generate sufficient funds for you to retire. That's why working with an excellent financial advisor and business coach is crucial. Action Management Pros call help - Give us a call!

ELEVATE YOUR BUSINESS

Optimizing business succession with Action Management Pros

Shifting roles or stepping back from your business is a big move, especially in home contracting. Our consultant team at Action Management Pros, led by Chris Scully, knows the ropes. We've helped many businesses make changes at the top. We help you figure out who's right to take over your important jobs and make sure they know the ins and outs.

Think of a transition as setting up your business for success long after you step back. With our help, you can be sure your business is in good hands. Plus, it's easier on your mind knowing everything's sorted.

Are you thinking of making a change? Set up a free consultation with Action Management Pros to learn more about business succession planning. We'll help your company stay strong, whether you're taking a break or retiring for good!

chris scully - owner of Action Management Pros

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