What is Succession Planning?
PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Succession planning is often an overlooked aspect of running a business. The term refers to the strategy used to pass on leadership roles if an important person decides to retire or is unable to work or carry out their usual duties. 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 roles, leading to poor management. Here’s 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 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 provide the basis of the planning tools available to business owners, along with advice from legal teams and other knowledgeable 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 find out more about succession planning.