Plan now for succession before it's needed

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What you will learn:

• If you fail to plan, you are planning to fail

• Lack of succession planning can lead to business failure

• identifying key team members and their impact on the business is a great start

If you suddenly couldn’t go to the shop for three months, completely cut off from it, would it still be there when you were ready to go back? Please linger on that question. Don’t allow yourself to minimize or disregard its impact. I know your inner voice is telling you that you’re healthy as an ox, that you’re different and nothing bad is going to happen. Because you’re right -- until you’re not. 

What I am talking about is succession planning. For me, there are two scenarios for succession planning. There is a short-term scenario and a walking-away scenario. Shop owners don’t like talking about either one because it requires them to admit that something could go sideways. It’s hard to plan when your focus is monopolized by putting out fires and just surviving to get to the end of the day, week, or month. 

Then suddenly something goes wrong, and you or a key team member gets sick or hurt. Now what? 

Instead of having a plan in place for such an event, you or your team react. Many businesses end up out of business due to a lack of succession-planning in the case of illness or injury. This is the short-term scenario.  

Instead of waiting until there is an issue, you will need to proactively do the following to mitigate the loss of a key team member:   

• Identify the key members of your team. Not every team member has the same impact when they leave for an extended time. Your first task is to identify the staff whose extended absence could have a disastrous consequence for the business.   

• Assess their duties and responsibilities. How much of what they do is a documented procedure now and how much they have learned to do on their own? Have them document what they are doing now so the finished document becomes a resource for all who follow in their footsteps.  

• Train someone else to step in if needed. Before you can train someone, you must make sure that the responsibilities that you want them to take on are something they want to do. Pushing an unwilling participant through this process is like pushing a rope! Once you’ve established that they have the desire to grow in this area, you need to find out their preferred method of learning. Some people are auditory learners, meaning they learn best when they hear the training. Others are kinesthetic learners meaning they learn when they do it. And finally, there are visual learners, meaning they learn best seeing it done. 

  When you’re teaching someone to do something, I highly recommend the EDGE method of teaching. It’s a method used and taught by the Scouts of America. If you would like a breakdown of how that teaching model works, go to www.180biz.com/edge and download an in-depth description that will help you incorporate this tool into your business. 

• Monitor their performance and mentor them as needed. Decide on what you’re going to measure and when you’re going to give feedback to help them grow. Giving feedback isn’t to catch them doing something wrong or make them feel bad. I want you to remember that Wheaties isn’t the breakfast of champions, feedback is. Feedback helps you create teachable moments where you or your key team member can mentor the person learning and grow confidence as they go.  

Please remember that this process takes time. To be effective, this training may take many months to ingrain in your team member. Once they’re fully trained, if something happens, you can rest assured that your business will weather the storm and come out stronger as your team comes together to work as a single unit.  

Then there is the walking away succession planning scenario. The lack of succession planning when you’re ready to sell your business is so sad. What usually happens is you get to a point where you’ve had enough and decide you want out, now! Based on the blood, sweat, and tears you’ve poured into your shop, you feel it’s worth a million dollars. I can’t tell you how many owners I’ve seen crushed when they find out what their business is worth, and they’re faced with two options. They can either keep working in the business and collecting a paycheck or they can sell it and get a job doing something else because the nest egg they thought they had was never there.  

To avoid ever having to deal with this scenario is to create a succession plan for retirement. I have several clients I’m working with who are starting to think of a strategy for exiting their business. There are many avenues for making this happen that I will defer to the experts. What I help them do is to construct and execute a plan that creates a sustainable and very profitable business without their daily interaction, because that’s when a business is worth the most. For this plan to be successful, it’s going to take people, planning, and profit.  

You need the right people in the business, serving the right people (your ideal client) who value what the business has to offer, and the right people advising you to maximize what you’re doing while helping you avoid the “potholes” of business. These advisors make up what I call your “board of directors.” 

Once you have the right people in place, you need a plan that takes you from an employee to a business owner. The difference is going from working in the business (usually the glue that keeps the shop in one piece) to owning a business that generates a healthy return without you being there. This is finally the freedom every shop owner dreams of. 

Finally, you need profit. Sustained profit. While there are many factors that go into determining the selling price of a business, a rule of thumb I use is adding up the profit on the tax return, adding back in owner salary and perks over four to five years. This is a crucial step, because whoever is looking to buy the shop needs to have enough profit to pay themselves and satisfy the debt load due to the purchase of the business. 

I believe every shop owner must make plans for both scenarios to truly have the peace of mind that comes when they know they can provide for their family, as well as for their team and their families. I hope you’ll take this subject seriously and act on it because you never know when life is going to knock you or a key team member down. Remember the Scout motto: Be prepared. You’ll be glad you did.