What is Succession Planning?

Succession planning is often an overlooked aspect of running a business. The term refers to the plan for passing on leadership roles. This happens when an important person retires or cannot work.

The importance of this planning cannot be understated as it provides clear instructions for a transfer of leadership. Without it, a business could enter a crisis with unclear and undefined leadership positions, leading to poor management. Here are some important things to know about succession planning:

Benefits of Succession Planning

The key benefit of succession planning is that it provides stability and predictability to what could otherwise be an unpredictable and volatile situation. A talent pool of potential new leaders can be identified and appropriately trained to develop the required skills and knowledge to a fill leadership role and hit the ground running.

Family Business Succession Planning

In family business contexts, it often involves family members. The same principles and goals should broadly apply when formulating a succession plan: prioritising stability, ensuring a smooth transfer of power, and training the next generation of leaders to ensure a smooth family business succession.

4 Stages of Succession Planning

It is widely accepted that there are four key stages to effective succession planning:

1. Identify potential successors from internal candidates

2. Create a development plan and provide development opportunities to identified candidates

3. Establish a transfer of ownership plan (this may require input from legal advisors)

4. Establish contingencies

These steps form the foundation of planning tools for business owners. They also include advice from legal teams and stakeholders in the business.

Legal Perspective

The business case for this type of planning is important, but enacting the specifics will require some legal expertise. Expert lawyers will be able to help identify how to properly transfer ownership of a business as part of the estate administration planning process and how best to implement your strategies.

With experts in both corporate law and Wills, Trusts and Estates, DFA Law can provide invaluable insight to businesses’ building their succession plans. Speak to one of our expert lawyers to learn more about succession planning.