Here’s a concise definition of succession planning. I found it at the National Federation of Independent Business web site (Succession-Planning Preparedness Quiz):

“Effective succession planning involves building the value of your business during your period of ownership and management, and having a plan in place when you’re ready to step down. It means that management authority and control are delegated responsibly. Finally, it means that the benefits of ownership are fairly distributed to those who are entitled to them.” (www.nfib.com/object/2772105.html)

There is one obvious omission – premature death of the owner, especially if he or she still actively runs the business. To state it bluntly: if a meteor strikes you tonight, would your business survive?

Can you answer that question to your key employees, your investors and/or partners, your suppliers and your family? My first client did that every year, in writing to all affected individuals. I can still hear Herb’s words. “All these people rely on me, in one way or another. Several have made a major commitment to me and my business. I feel obliged to show how their trust in me is justified.”

Herb reviewed his Succession Plan every year, as an integral part of his overall Business Plan. How could it be otherwise? From the NFIB definition above: “management authority and control are delegated responsibly.” Is proper delegation a goal for only succession? Or is developing your management team an ongoing, critical responsibility for any growing small or family business?

To attract the type of people you want, you may need a preliminary Succession Plan first – especially if you may need to offer equity. Your Succession Plan may need to be quite flexible – if, for example, your children are still young or yet untested in the business.

You may have already hired a CEO, thus removing yourself from daily operations. Should you (and can you) also insulate senior management from interference in the future, by your heirs? Should only family inherit your remaining equity? Should your remaining equity be sold to your family, and/or an employee stock purchase plan?

So, when should you begin Succession Planning? The best time is always now. Include it with your annual Business Plan, even if your decision becomes, “I don’t need a Succession Plan yet.” Start asking succession questions now, this year, as part of what your business needs for next year. If you don’t start asking those questions too soon, then you do risk stagnation.

If you’re a founder, don’t miss possibly the biggest succession milestone of all. To keep or sell the business. Are you the best owner to keep the business growing, adding value for yourself and all other stakeholders? Or is time to retire, or cash out and perhaps start another business? This too should be asked every year, especially if you’re still in daily control of a business. Where is it written that founders (or founding families) must be the ones who grow a business to its full potential? (Not many businesses are all that growable.)

Entrepreneurs come in three different varieties – three different ways to be productive and successful – three different ways to win.

1. Some entrepreneurs excel at creating new businesses, but cannot manage them beyond a certain size. Many of these folks become “professional founders” — creating and cashing out of many successful startups. Others, perhaps the majority, are satisfied to have created a livelihood for themselves. They may employ a child or two, perhaps few non-management employees.
2. Others excel at growing an existing business to its full potential, developing management teams, and creating entrepreneurial management structures – but are incapable of starting from scratch.
3. A few founders – very few in my experience – can learn and grow enough to take their vision from a garage business to $5 million or more in annual sales – on their own, or with the help of family.

   Summing up, now is always the best time to begin asking succession questions. And one of the first questions should be, “Which type of entrepreneur am I: creator or builder, and can I become both if needed?”

(Editor’s Note: Mike Hihn, a new resident in Seabeck, has been a small-business consultant and entrepreneur coach for over thirty years. Contact him at (877) 596-6379 or at www.Rent-A-Manager.com.).