Succession Planning for Business Continuity

You have spent years building and managing a successful business. To ensure your hard work is not lost, take the time to develop a succession plan. A succession plan establishes key roles and future leaders when you are ready to transition the business and provides guidance under unexpected circumstances.

Key Components of a Succession Plan

A well-thought-out succession plan serves as a detailed roadmap when you decide to retire and transfer your business to family members, sell it or leave to pursue a new opportunity. At a minimum, your plan should:

• Name potential successors
• Identify key roles
• Provide for the development of successors and key employees
• Document business processes and strategy
• Include a transition timeline and communications plan

Benefits of Succession Planning

A succession plan provides for the continuity of leadership and management as well as the preservation of business culture. Over the long term, a succession plan can yield results in the form of business outperformance and, particularly for family-run businesses, improved relationships. The initial intent of a succession plan may be for the future transfer of your business, but it can also provide significant benefits before, during and after a change of leadership.

Pretransition Advantages

Developing your succession plan years before a transition can identify critical roles and new leadership, and highlight potential gaps or development opportunities. This level of assessment benefits your business by way of a comprehensive review and strategically positions it for the future by demonstrating your commitment to career development, which can positively impact employee retention. Early planning affords you time to think through the options for transferring your business. Gifting or selling the business to family, selling to employees or external parties, or merging with another Succession Planning for company each presents distinct advantages and considerations. To help ensure a smooth financial transition, your succession plan should: 

• Outline a process for determining the value of your business
• Suggest financing options, if needed, for new leadership to explore
• Consider the income, estate and gift tax ramifications of the transfer

Importantly, a succession plan can address unanticipated situations that may arise. Death, illness, disability, personal difficulties, abrupt resignation or any number of unforeseen issues can present challenges to your business. A succession plan provides guidance for employees to be able to keep operations running smoothly.

Employee retention can help avoid both potential business disruptions and the expense of replacing and training a new employee. The estimated company cost to onboard an employee with a $50,000 annual salary ranges from $25,000 to $100,000.*

During and After the Transition

Once you decide to transition the business, or need to step away unexpectedly, a succession plan will help maintain stability and minimize any impact on business operations. Employees and new leadership will feel prepared and confident with their new responsibilities. On a personal level, a succession plan will give you peace of mind knowing that your business will continue to thrive. Documenting your values and vision for the future of your business and your employees will help ensure your business legacy lives on.

Revisit Your Succession Plan

Succession planning is not a singular task. Regularly assess your organization’s plan and revisit it when there is a major life event, change in business focus or performance, or departure of a key employee. Glenmede’s Business Owner Advisory Services professionals can partner with you to develop and document a succession plan personalized to your unique situation and goals.

*“8 Employee Retention Strategies for Small Business Owners,” Bank of America Center for Business Empowerment, July 11, 2024.