Monday, October 2, 2023
HomeBusinessThings to Consider when Naming the Successor of Your Business

Things to Consider when Naming the Successor of Your Business

Planning and preparation are crucial to effectively starting and operating a small- or medium-sized business. Most business owners make critical decisions every day, yet one of the most important plans for the business’s future is sometimes put on the back burner: the question of who will take over.

Illness or other accidents happen – and they can put your family and employees in a tough spot. You may already have a whole life insurance or term life insurance policy to take care of any business debt you leave behind; it’s also important to create a succession plan so your business is in safe hands if the unthinkable happens. Even if there’s no emergency, it’s good to prepare for the day you decide to step back from daily operations.

Here are a few things to consider when naming the successor of your business.

1. You can’t replicate yourself

As the primary business manager, nobody knows the business as well as you do. But it’s important to understand that you’ll likely never find someone who thinks exactly like you. Even if you have children who will step into your shoes eventually, they likely won’t make all the same choices you would. Your goal in naming a successor is to find someone passionate about the business and ready to build on it. Part of this decision will involve making peace with the fact that they may do things differently from you.

2. There may be no obvious candidate

Some business owners may be lucky to have a high-performing employee who has already learned the business well. But in other cases, no single employee may stand out enough to be named as a successor. In this case, it may be helpful to look for other qualities, like good leadership skills, a deep understanding of the industry, money management skills, or even just a good rapport with clients and fellow employees. There’s a significant benefit to asking yourself about your successor early on: even if no current employee is perfectly qualified, you have time to train them and help them grow into the role.

3. You can get outside help

In family businesses, the task of naming a successor may have an added layer of complication. You may feel as if you’re picking a favorite and your family members may not always agree with your decision. In such situations, you can get help from a business management consultant. An external consultant can give you an unbiased opinion on who is best placed to take over. And should they find that nobody is suitable, you can at least make an informed decision about how to proceed.

4. You can temporarily hire someone new

It’s not unusual for family business owners close to retirement to temporarily hire a CEO who isn’t a family member. A temporary CEO may be able to name a successor and, over time, give them the training they need to succeed. This method works well for business owners who are ready to take a step back from the business but can’t decide who should take over. However, this type of hiring may take considerable time and resources – so it may not make sense for everyone.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


Most Popular