When should I start thinking of succession planning as a business owner?

Written by Austin Blackburn and Talek Cox | Corporate and Business Law Team | 10 July 2024

Succession planning is an important aspect of managing a small business, however many owners delay it until it’s too late. Knowing when to start thinking about succession planning can make a significant difference in the continued success of your business.

The Benefits of Proactive Planning

Succession planning should begin as early as possible. Starting early provides plenty of time to identify potential successors, prepare them for leadership, and ensure they are well-prepared to take over. Early planning allows for a gradual transition, reducing the risk of disruption to the business. Additionally, early planning allows for a more thoughtful and strategic approach, giving you the chance to refine your plan as your business evolves.

Business Growth

When your business is experiencing growth, it’s an excellent time to start thinking about succession planning. During these periods, the business's future looks promising, which makes it easier to attract and develop potential successors. Planning during growth phases also ensures that the successors are familiar with the business's trajectory and can continue driving its success.

After Major Milestones

Significant milestones such as reaching a revenue target, expanding to new markets, or completing a major project are good triggers to start succession planning. These milestones often signify stability and success, creating an opportunity to think about the future leadership of your business.

Before Life Changes

Personal life changes, such as approaching retirement age, health issues, or changes in family circumstances, are strong indicators that it could be time to start succession planning. Planning for these events ensures that the business is prepared for your eventual departure and that there is a clear plan in place for a seamless transition.

Business Valuation

If you are considering selling your business or attracting investors, having a solid succession plan can significantly enhance the business’s valuation. A clear plan demonstrates that the business can continue to operate successfully, making it a more attractive investment. Starting succession planning in advance of a potential sale or investment is crucial. Investors and buyers are more likely to have confidence in a business that has a well-defined and actionable succession strategy.

When Employees Show Leadership Potential

Identifying and nurturing potential leaders within your organisation is a continuous process. When you notice employees showing leadership qualities and an understanding of the business, it’s a good time to start thinking about succession planning. Providing these individuals with the necessary training and opportunities can prepare them for future leadership roles.

There is no one-size-fits-all answer to when you should start thinking about succession planning, but the general rule is the earlier, the better. Proactive succession planning ensures that your business is prepared for any eventuality, maintains its value, and continues to thrive under new leadership. By integrating succession planning into your business strategy from the outset, you can safeguard the future of your enterprise.

If you’re considering succession planning and need expert advice, our team are here to help. With years of experience, we can guide you through the process and ensure your plan is comprehensive and legally compliant. You can get in touch with them by calling 01752 827125 or emailing enquiries@nash.co.uk.