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Succession and estate planning: can it ever be too soon?



Most of us aspire to be remembered fondly and reverently, having left a positive mark on the world, or the business you have been at the helm of.

Most of us aspire to be remembered fondly and reverently for making a positive mark on the world, or on the company you helmed.

‘Great is the art of beginning, but greater is the art of ending.’ (Henry Wadsworth Longfellow)

As helpful as it would be, none of us have a crystal ball that tells us exactly what the future will look like, or how quickly the end of our careers might come. As a business leader, proactively starting conversations about your succession and legacy early will put your organization in a much stronger position to deal with what lies ahead and enable a smooth leadership transition when the time comes… whether that’s over is five, ten or twenty years old. ‘ time.

But in our experience at Gray Lemon, founders in many industries ignore such thoughts until the clock starts ticking and the inevitable is staring them in the face. Unless something unfortunate happens and they no longer have any influence on it.

The reality is that if you don’t talk about leadership transition at least three years in advance (at the very least), you’re setting yourself up for an exit that is awkward at best and disastrous at worst. Any degree of ambiguity or doubt in the passing of the baton can upset shareholders, disrupt teams and hurt your bottom line.

So, where to start? Let’s look at a few key points:

When is the right time?

‘I still have a few good years left in me!’ Sounds familiar?

Procrastination in letting go of control is more common in business than you might think. With so much time, energy and money invested in it, it can be difficult to even consider this happening, let alone prepare for it.

Legacy planning and leadership changes can be sensitive and confusing topics to address. So it’s worth consulting an expert in this field to guide you through your options.

Start as you want to continue

As in most areas of business, clarity and collaboration are key. By involving your senior leadership team in the process as early as possible, you can develop a plan that everyone can buy into, both structurally and culturally.

Succession planning requires a 360° approach. You need to examine the impact of your departure from all angles and consider the perspectives of everyone involved. After all, an exit is as much about them as it is about you.

Who will steer the ship?

A change of ownership can drastically change the way a business operates. Choosing the right successor is therefore crucial. Understanding the nuances of the figurehead role and the unique value of what they provide is critical. Without an awareness of how the person leaving the exit is perceived both internally and externally, a huge void can be created that can be difficult to fill.

Time is crucial to grow and position the right people. By taking a long-term view, companies can avoid power struggles or last-minute politics because it gives stakeholders space to agree on who is best suited to the law.

Unfortunately, changes can sometimes happen much sooner than expected. Without a succession plan in place, uncertainty will undoubtedly follow both internally and externally. Who runs the company? What will it look like in the future? Will the name above the door change? How does this affect the quality of the service/product?

Family ties

Of course, some inheritance issues should be easier than others… but that is not always the case. Often the most difficult situations to deal with are those involving family, where favoritism and rivalry can quickly disrupt a successful business.

Encouraging alignment on business purpose and shared ambition is the best place to start when disagreement arises. If things get tricky, consider bringing in an independent facilitator as a first step to align differing perspectives and reach agreement on how to move forward. If that doesn’t work, mediation is also a very effective way to reach a solution that everyone can work with.

Financial affairs

Financial considerations are a natural priority for any departing leader and for all parties within the ownership structure. Whether it’s a share reallocation or buy-in opportunities, all exit options need to be carefully considered, both for the departing founder and for the health of the company.

It is always best to consult a specialist legal and/or financial advisor to ensure that everyone involved has defined their individual and collective objectives and understands the choices available. The sooner a joint decision can be made the better, to maximize the value of the business while the owner is still in place.

(Re)defining your goal

A new era of leadership may provide an opportunity to reassess the company and its place in the marketplace. For any change in direction to be successful, it is essential that the company’s purpose or vision for the future is clearly defined and agreed to by the new leaders. An external, fresh perspective can bring this process to a successful conclusion.

A revised purpose should build on the organization’s history and legacy while establishing a new roadmap that the entire workforce can engage with and support.

By agreeing specific, measurable and timely objectives and clarifying the role, senior employees will feel confident and empowered to drive the organization forward.

Manage perceptions

Let’s not forget your employees.

Clear internal communication will help alleviate any concerns or uncertainty within your team, especially if the person leaving is the original founder. Make sure your employees have the time to focus on the future vision and build trust in the new leadership. Your employees must feel part of the journey.

Well-timed and appropriate external messaging is also crucial. A risk assessment done well in advance can help measure the impact on the business from an external perspective. This includes how customers, clients, stakeholders, shareholders and the wider market will respond, identifying any damage to the perception of the business and its future success.

What’s next for you?

As an entrepreneur, it is crucial that you are prepared for the next phase of life. Without a clear path in mind, it can be all the more difficult to distance yourself from your “baby.” Maybe you still want to be involved in some capacity, or maybe you’re leaving to start your own business or in a completely different field. Whether you continue in business or retire to enjoy the fruits of your labor, therein lies a different message that must be carefully tailored to communicate the next steps in a positive light to all parties, both internal and external.

To sum up

The key to success? Give yourself time to think of a worthy ending so you can go home feeling proud of all you’ve accomplished, and excited for all that’s to come.

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Succession and estate planning: can it ever be too soon?