The Importance of Business Succession Planning

Privately owned businesses are a key part of business in the US. However, many small businesses consider what will happen to the business once they retire. Most of the time spent in the business is related to building, hiring the right people, working against the competition, but rarely succession planning. This is a misstep that should be corrected. Most business owners don’t want to address succession planning because it reminds them of having to retire or even that they will someday pass away. Successful business owners cannot imagine anyone else running their business, so they don’t address the issue. With that attitude the potential for a business to have to close when an owner passes away or retires due to health issues, then there is no time to plan. Succession planning needs to be done now.

• Succession planning is a multi-faceted and complicated subject.
• Owners know any succession selection will likely isolate those who are passed over, potentially offending key people in the organization.
• If employees include the owner’s family members, family dynamics-good and bad-will be drawn in, making most owners anxious about succession planning.
• Most business owners don not know how to manage it.

Benefits of Effective Succession Planning

Succession does not always progress as the owner imagined. There is the likelihood that the owner may suddenly die, become disabled, or receive an employment offer that will force the owner to leave the business. Strong succession planning offers stability not only for the future of the business, but also to bankers, financiers, suppliers, vendors and customers. It helps to conserve and shield one of the most important of business assets-it’s people. The people possess experience, knowledge and intellect which is critical to the ability of the business to remain a going concern.

It is the responsibility of the board or others who are in control to make succession planning a priority, many times the decision might override immediate and substantial issues. In addition to being necessary for risk mitigation, succession planning provides some specific benefits:

• It provides a framework that drives senior executive improvement, aligning leadership at the top of the business with the strategic plans of the firm.
• It gives the CEO, through an ongoing examination of the job requirements, the occasion to fine-tune his or her role in light of changing business factors and strategic essentials.
• It strengthens the connection of information between the board and the senior management team through habitual contact that is part of the board’s appraisal of candidates.

Perform habitual, in-depth reviews.

The succession plan should be reviewed twice a year, including an assessment of the appropriate bylaws and succession processes and a review of the baseline competency requirements for the next CEO-a working document that recapitulates the requirements if the search for a new CEO were held immediately.

To establish those requirements, the board should begin by examining company trends and strategies over a five to fifteen year period, considering the impact of various circumstances in which the business will be affected by challenges including supply chains, customers, competitors and investors, or the hazards or prospects brought by changing environment and fiscal conditions. Looking at the impact of broad developments such as these will help to ensure that the company’s next principal will have the capacity and experience necessary to react to unfolding multifaceted events across numerous fronts. The board should also use this occasion to analyze successful CEOs from inside and outside the industry and identify characteristics that have contributed to particular success.

The board then refines these considerations into a set of requisite capabilities. Depending on the company’s situation and strategic direction; some capabilities will be considered essential and others of secondary or little importance.

Evaluate the list of candidate qualifications against the firm’s senior management.

The board should be updated semi-annually with a list of internal candidates who could assume leadership through the succession plan. The leadership development plan of each candidate should be updated as well. If there is not an internal candidate from which to choose, then recruiting from external candidates should be done. If recruiting externally, the choice needs to be made at least three years prior to the changeover thereby allowing the candidate ample time to learn all of the aspects of the business.

Qualities of a Good CEO.

When considering potential CEOs or replacement principals for the company, such nominee(s) should have the following characteristics.

A good CEO or leader of the company must be able to accurately convey the vision and mission of the company in order to allow staff to follow suit. Everyone in the organization and external stakeholders also will seek proper direction from the leader.

The CEO must understand the internal workings and activities of the business in every way, but should not become involved in micro-managing the business. The CEO must have or must develop a highly trained management team that will handle these tasks. The CEO will thus be able to focus on the primary duties of increasing revenues and meeting the goals of the company.

In order for the CEO to ensure that the direction the company is taking is in line with the vision and mission of the company, the CEO should become aware of progress within the industry and how the progress will affect the company. Trade conferences and trade associations are essential for aiding in this knowledge. The CEO must identify any present or potential threats to the company and know how to overcome them. Capitalizing on future opportunities is equally important.

The company must provide to their CEO a strong management team which is capable of running their aspect of the company and is accountable for his or her responsibilities. Managers should not attempt to do the work of other managers unless specifically advised to do so by the CEO, and then only if the other manager is not performing adequately. Strong managers know how to train their staff and to acknowledge the accomplishments of their staff which will keep them motivated toward meeting the goals of the business.

A successful CEO can focus on and find ways to help customers solve their problems. Products are described in the ways in which the address the needs and challenges of the customer rather than on the product’s capabilities. The CEO should meet with customers periodically to obtain suggestions from them on how to improve products while obtaining an understanding of the customer requirements for a strong relationship with the business.

What Keeps Women Business Owners Up at Night?

A national survey of women business owners (WBOs) conducted by Group, Inc. (Nasdaq: WWWW) and the National Association of Women Business Owners (NAWBO) found a pervasive sense of economic optimism, including a prediction by most WBOs (85 percent) that more women will become entrepreneurs in 2013 than in past years. WBOs also plan to invest more (38 percent) or the same (54 percent) in hiring this year than they did in 2012 – a positive sign for the economy.

2013, the Year of the Female Entrepreneur

The State of Women-Owned Businesses survey found that the large majority of WBOs were optimistic about their business’ overall performance (81 percent) for the year ahead. They were also optimistic, though slightly less so, about the broader economic outlook (74 percent) in 2013.

“The 2013 State of Women-Owned Businesses Survey reveals that even in these tough economic times, women entrepreneurs are optimistic about business opportunities for the year ahead,” said NAWBO President & CEO, Diane L. Tomb. “This survey informs us of the challenges and opportunities facing NAWBO members as well as women business owners in general. At NAWBO we will strive to address these issues on behalf of all women entrepreneurs.”

The survey also uncovered serious challenges facing WBOs, including the need to reach new customers. and NAWBO developed the survey to better understand the state of women entrepreneurship, including: women business owners’ (WBO) motivations for starting their businesses, what business challenges they face, what and how micro- and macroeconomic factors impact their businesses, what investment plans they have for the year ahead and what public policy issues are of greatest concern.

What Keeps Women Business Owners Up at Night?

With regard to public policy matters, the top four issues on the minds of WBOs are: the state of the economy (57 percent), health insurance cost and affordability (40 percent), business tax issues (36 percent), and access to a quality workforce (36 percent). Though two in five WBOs said that health insurance costs and affordability are important issues to them, many (71 percent) feel that the Patient Protection and Affordable Care Act (“Obamacare”) will have no impact upon the way they do business.

Financing Options to Meet Business Capital Needs

More than three quarters (78 percent) of WBOs did not seek a new or extended line of credit in the past year. Of these 78 percent, more than half (68 percent) indicated they did not want additional credit in the first place, and the others (32 percent) did not think they could get credit if they tried. Most WBOs financed their businesses through credit cards (45 percent), business earnings (40 percent), or private sources such as personal savings or contributions from family or friends (37 percent).

Who Should Become an Entrepreneur?

Survey respondents assert that women start their own businesses for a variety of reasons, including: having a vision for a business idea or a passion for solving a specific industry problem, wanting control or a more flexible work-life balance, and being in the right place at the right time. When asked the biggest motivation for starting their business, the most common answer was that they were following their vision (28 percent), followed by finding an idea that allowed them to become an entrepreneur (21 percent). The survey found that the most important traits for running a successful business are to have a passion for an idea (1st), to have a vision to succeed long-term after the business is launched (2nd) and a willingness and attitude to fail before you succeed and to take risks (3rd).

Finding New Customers through Online Investments and Social Media Marketing

When asked what they see as their biggest challenge to running their business in 2013, nearly two in five (39 percent) of WBOs said that it was gaining new customers. To gain customers, nearly three quarters (73 percent) of WBOs plan to invest more in marketing in 2013. Specifically, they will invest in social media marketing (36 percent) and search engine optimization (SEO) (36 percent). This is not surprising, as nearly half (44 percent) predict that social media and SEO are the future of small business marketing. Conversely, WBOs anticipated that traditional outreach approaches, including print and direct mail (1.6 percent), online advertising (4.4 percent) and email marketing (6.2 percent), will have less impact on small business marketing in the future.

When considering what marketing tactics currently have the greatest impact on a business’ bottom line, more than half (52 percent) of respondents indicated that website design and maintenance was very important, followed by social media marketing and SEO (38 percent) and email marketing (25 percent). And WBOs indicated that LinkedIn (27 percent) is the most valuable social media platform to them, followed by Facebook (26 percent), YouTube (18 percent) and Twitter (17 percent).

“Women business owners are laser focused on reaching new customers, and their strategy for doing so is focused on improving their businesses’ online presence,” said executive vice president and chief people officer, Roseann Duran. “This is great news for time-strapped consumers, as they can expect to have an improved and more socially engaged online experience with many of their favorite businesses in 2013.”

For full survey results and to view and share the 2013 State of Women-Owned Businesses infographic, visit