Are you a business owner or leader integral to your company’s success? If so, succession planning may not only help your business thrive when you’re ready to retire but also potentially strengthen your employees’ skills and knowledge sets.

And that could be a win-win for everyone — including your company’s future leadership.

To better grasp how a business succession plan can help foster growth, smooth a path for future leaders and give you greater peace of mind as your retirement approaches, let’s take a closer look at the topic.

Create a forward-looking company culture

When you own a small or medium-sized business, it can be easy to fall into the habit of focusing on immediate concerns and putting off thinking about the future until you have more time.

But that short-term focus can erode your company’s ability to grow over the long term.

Making the time to create a succession plan not only forces you to imagine what you want your business to look like in the future, it can also help — directly and indirectly — your employees think more about what the future of your company holds for them, too. Consequently, they may show more discretionary effort, commit to polishing skills and abilities to advance their knowledge and be more inclined to innovate.

In other words, that cultural shift in mindset — led by leadership — may help your company adapt, innovate and thrive.

Prepare for the unexpected

Even if you’re nowhere close to retirement, succession planning can help to protect your business from unplanned disruptions.

For example, if you get sick or must take extended time away from running the business, having people ready to fill in for you can keep your business afloat — and reduce your stress while you’re out of the office.

As part of your succession planning, you can also work on continuity plans that might be needed when someone else takes over running the business or if a disaster impacts your business.¹

Business continuity planning allows you to ensure that key people have access to relevant resources — think business systems, account data, financial accounts — as well as any relevant third-party professionals, such as accountants or attorneys.

Cultivate your talent

Succession planning can also help keep things running smoothly if one of your key employees leaves the company or is temporarily unable to work.

Identifying internal staff members who could step into key roles before it’s urgent gives you time to train those employees and build up the soft skills they might need to spend more time engaging with key customers or managing other employees.

Of course, you’ll want to talk with your employees to see if training to move up is something they’re interested in doing. Not every employee wants to take on additional responsibilities, and it’s important to confirm interest before finalizing your plans.

Identify and fill training gaps

When you identify the internal staff members whom you want to train as part of your succession preparations, you may want to explore whether there are other training and skill gaps you can help them close.

For example, if your sales team leader says her potential successor needs training in a certain type of software, it might be worth training one or two reliable sales team members with the potential to replace her, too.

This strategy can help you strengthen your team’s shared skills. It can also help you reap more value from your training investment — all while shoring up your bench to replace a senior staff member if she exits her role.

Preserve and share institutional knowledge

Another way succession planning can strengthen your business over the long term is by saving and sharing the institutional knowledge that individual leaders, managers and employees build up over time.

This kind of knowledge can be easy to overlook but may be critical to a smoothly running business.

For example, if your business uses heavy equipment or runs a production line, you may have longtime maintenance or line workers who can tell when a piece of machinery needs service by the sound it makes.

Losing that information when the worker retires can lead to unplanned downtime and higher maintenance costs, so it’s wise to make sure other employees learn this skill as well — or find another way to detect issues in lieu of relying solely upon one employee.

Provide a consistent customer experience

A clear succession process can allow your company to continue delivering the kind of service or product quality that your customers expect, even when there’s a change in leadership or management.

When your succession planning also prompts wider training to fill skill gaps and share institutional knowledge, your business can deliver a more consistent customer experience long before the succession plan takes effect.

That can lead potentially to more loyal customers and a better brand reputation, which can help carry your company forward.

Create a framework for the company’s future

For business owners, succession planning is an invitation to think about what will happen to your business when you’re ready to retire.

If you want to pass a family-owned business to your employees or children, you’ll need to work with an attorney to ensure that the transfer is managed correctly.

If you plan to sell your business, start thinking about what form that sale might take. You might choose to sell the entire business² at once, gradually sell it to your partners or another buyer, or lease it out.

Whichever option you choose, you’ll need to decide how to calculate the value of your company and talk with professionals about how to plan, structure and finalize the sale to optimize the proceeds and lessen the tax impact.

The takeaway

Succession planning can be a helpful strategy for anyone looking to retire, transfer their company or both. And it may have benefits beyond the obvious, including the chance to shore up talent, invigorate employees and possibly spark innovation.

Because privately held businesses are often part of a larger pool of assets, it can be helpful to work with financial advisors who have a network of relevant professionals (e.g., lawyers, tax attorneys, real estate professionals). Working together, this team can help you prepare what comes next in your business journey.

If that’s your situation, note that RBFCU Wealth Management, The Garner Davis Group is ready to help you plan for the future — for yourself and for your business — as part of our commitment to providing custom, comprehensive advice.