Contractors Can Get Ahead to Ensure a Smooth Transition Between Owners
As a contractor, the time will eventually come for you to make the decision to leave or retire from your company. When this happens, the business will likely be sold, merged or turned over to someone. No matter which of these paths you’ll take, it will be a big, emotional change for everyone involved. That’s why it’s important to set up a proper succession plan—long before that day comes.
Don’t let the notion overwhelm you. You’re always thinking about the future of your company; planning for an eventual exit is simply part of that strategic mindset.
There are six important factors you should take into consideration when succession planning:
1. Start Early
A succession plan takes months to create and years to execute. This long process encompasses a lot of communicating, mentoring and learning. Getting a plan in place now means you’ll be ready to start slowly transitioning the day-to-day responsibilities and onboarding a new leader when the time comes. The bottom line: The earlier you start, the more prepared for change you and your company will be.
2. Map Out Your Plan
A succession plan isn’t something that is devised in the moment. This plan needs to be documented not only for you but for everyone else involved as well. Write down each step that needs to be taken, and add notes along the way to keep track of each detail. Refer to the plan whenever necessary to make the transition as smooth as possible.
3. Include an Exit Plan
An exit plan is a necessary addition to your succession plan because it deals with different goals: A succession plan focuses on transitioning the owner successfully out of the business and moving up current management into new roles, while an exit plan focuses on helping the business owner take control of monetary assets. This helps you protect your finances as you move into the next stage of life. About 48 percent of business owners don’t have a formal exit plan, 58 percent never had their business officially appraised and 75 percent believe they can sell their business in a year. This is why it’s crucial to include an exit plan within your succession plan, because the change in ownership can happen at any moment.
4. Accept the Change
As the plan turns to action, there will be a lot of shifting of roles and people doing new tasks. Change requires patience. Mistakes will happen as people learn their new day-to-day tasks. Know that it takes time, but soon things will slowly be transferred to your employees. As they gain more responsibilities, yours will lessen until it’s time to fully give up all tasks. Accept the new reality of the company as you and other employees move toward the future.
5. Set Up Family Generations for Success
Transferring a business is a common option for contractors. If this is the route chosen for succession, it’s best to set the family members up for success to keep the company running smoothly. Clearly communicate the goals for the business and discuss the finances.
6. Consider Company Values When Selling/Merging
You may want to consider merging with or selling to a larger company that aligns with your business’s values. If this is a path you decide to take, be sure to thoroughly vet the company that will be taking over. Does it have similar values? Does its culture match yours? What are its priorities? How are its customers and employees treated? You want to make sure your employees are in good hands after the succession is complete.
Succession planning is an investment not only for your company’s future but also for your team’s. Start planning now so you are prepared for a smooth transition into retirement when the time comes. Read tips on managing team members to prepare them for future leadership roles here.