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How to choose a successor for your business

Posted by Neha De

September 10, 2020

As a business owner, you are probably enjoying your time running your booming business, which likely plays a massive role in your everyday life. However, there will come a time when you will want to hand off that business, whether to spend more time with family, to retire or for any other reason.

And that’s why you must look toward a time when you’ll have to step away from leading . Succession planning takes time, and to be most effective, the process must start as early as possible. If something were to happen to you, the company and all of its employees could be potentially at risk, and it could even force the business to shut down.

Succession planning ensures that your company is prepared for the future — it keeps your firm moving ahead in case of inevitable circumstances that come with running a business. And a well-crafted succession strategy can help you streamline the process of turning over the leadership of your business when the time ultimately arrives.

Steps involved in choosing a successor

Choosing a successor for your business is an essential step in the process when planning for the future. You must take time to consider several potential successors, and then talk to each one of them to get a better sense of whether they are right for the leadership role, in addition to discovering whether they even want the responsibility.

Consider this step-by-step approach to effectively choose a successor for your business:

Step 1: Forecast analysis

You must have a solid understanding of the most significant challenges your company and its industry are likely to face over the next five to six years, in addition to the capabilities that the successor will need to lead the company past those obstacles. Therefore, performing a forecast analysis is an excellent way to plan out your strategy.

Note: Never assume that a younger version of the current CEO is the obvious choice for a successor. You should review each candidate’s vision, plan and understanding of the business before selecting a successor.

Step 2: Resource development

The ideal development practices differ for internal and external candidates. For internal team members, the process starts with identifying a small number of candidates from within the organization who show potential and who could eventually be groomed to take over the job in, say, four to five years.

Investing this time can be instrumental in helping you discover the right successor for your company. The identified candidates can work in rotations across different functional areas, take on assignments internationally or spearhead a division.

Talk to us about how our outsourced services can support your startup in making informed decisions.

On the other hand, external candidates are typically identified through an executive search firm. As potential successors, these candidates are typically hired to handle other positions inside the organization. This lets you — and your board of directors, if applicable — make strategic investments in the development of these executives, and also allows you to explore their likely effectiveness as a leader.

Step 3: Selection

As the transition approaches, the next step involves inviting the short-listed candidates to present their vision for the company's next five (or even ten) years to the board. After extensive presentations and discussions, you’ll be able to identify your potential successor from the pool of candidates.

Step 4: Trial run

Don’t wait until you decide to step down before involving your successor in day-to-day responsibilities. Instead, have the chosen successor assume some of your tasks while you’re still there. This will help them gain valuable experience and appreciate the opportunity to showcase their strengths, and will give you the chance to assess where that person might need additional training and development.

Step 5: Transition

After a successful trial run, it’s time for transition. An effortless transition focuses on both the onboarding process and the first year of the new leader’s tenure. While the onboarding process will be different for internal and external successors, you must ensure that, before the successor's first day, they are up to speed on the job by ensuring they have sufficient time to complete appropriate hand-offs with the outgoing CEO and have a sense of the areas that require their immediate attention. In addition, they should begin building relationships with the board.

At this step, it’s a good idea to put in place a plan for the first year which includes measurable metrics and milestones for the chosen successor, along with a supportive and apolitical coaching plan for the entire first year. This will allow the successor to continue carrying out the work they began when you first initiated the succession-development process.

Tips for choosing a successor

To select the right successor for your company, you need to be objective in evaluating the candidate’s aptitude, abilities, attitude and willingness to take on the new role. Here are some additional tips you can follow when considering your successor:

Make a list of essential attributes you’d like to have in your successor, so that you’ll have an easier time recognizing a good candidate. However, be realistic and don’t look for someone exactly like you. Expect to find someone who shares your passion, some of your attributes and, most importantly, your vision for your company.
Experience almost always trumps education. When choosing your successor, it’s ideal to go with someone who has real-world experience. Such people are usually solution-oriented and can resolve issues without extensive oversight.
Company culture reflects a company’s personality. If your successor doesn’t accept the culture you’ve developed over the years, a different culture will emerge and your company will change. Make sure your successor understands and embodies your company’s culture.
Never let emotions or your personal bias influence your decision. If your favorite candidate doesn’t possess the qualities and skills needed for the job, don’t consider them for that position.

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Escalon provides startups and small to midsized businesses with accounting, strategic finance, CFO services and support. Talk to an expert today.

Authors

Neha De

Neha De is a writer and editor with more than 13 years of experience. She has worked on a variety of genres and platforms, including books, magazine articles, blog posts and website copy. She is passionate about producing clear and concise content that is engaging and informative. In her spare time, Neha enjoys dancing, running and spending time with her family.

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How to choose a successor for your business

Steps involved in choosing a successor

Step 1: Forecast analysis

Step 2: Resource development

Step 3: Selection

Step 4: Trial run

Step 5: Transition

Tips for choosing a successor

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Authors

Neha De

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