NNBA Featured Expert

Succession Planning: An Overlooked Business Strategy

By Mila Carlson, PhD, MSHSA, R.N., CNLCP®, CMSP

Succession planning is an organized method of documenting the assets and processes of your business and determining responsibilities for the business to continue in your absence. This is done to prepare for potential opportunities of selling your business, forming a partnership or joint venture, retirement, or your unexpected absence (short-term/long-term/permanent).

Although each business is individualized to meet the needs of the owner, every business has 5 categories that need to be addressed. These categories are: Administrative, Financial, Information Technology, Legal, and Professional. The processes developed, activities performed, and strategies for future growth fall into these categories.

Regardless of how we address the specific needs unique to our business, there are broad topics within the 5 categories that need to be considered. For example:

• Administrative: daily business operations, maintaining supplies, and office equipment.
• Financial: billing processes, invoicing, and accounts payable. Insurance policies may be included here or in the legal category.
• Information Technology: computer equipment, devices, and any technical needs.
• Legal: contracts, dispute resolution, and naming a power of attorney to act on your behalf in your absence.
• Professional: protection, use, and storage of medical records; attorney-client responsibilities, maintaining client lists, and completing assignments.

As entrepreneurs we focus on starting, then growing a business, networking opportunities, and marketing. Once we have achieved our goals and recognize our successes, it is easy to become comfortable. While this is a common occurrence, complacency is dangerous in business.

Business owners must keep their options open for opportunities of expansion or future growth. If an option to take advantage of a merger or sell the business presents itself, how would you determine the value of your contribution or net worth? If an offer to sell your business is presented, how would you know whether the offer is equivalent to the value of your business?

Documenting business processes, assets, and client portfolio offers a means of assessing the value of your business. Preparing this information and maintaining it on a regular basis provides the financial appraiser the tools required to complete this assessment.

Unplanned absences are just that: unplanned. If you needed to be away from your business for an extended period of time, who can or will step in to fulfill your contractual obligations, make business decisions on your behalf, or close the business if required?

Designating individuals capable of fulfilling the needs within the 5 categories as part of succession planning allows you, the owner, to train the individuals prior to an event. It also provides an opportunity to communicate your preferences and direct your team on how to act on your behalf.

Succession planning can be an overwhelming project but is a necessary strategy for your business. There are many individual actions and details required to develop a realistic succession plan. Starting the process sooner rather than later will bring peace of mind to you as the owner, as well as to your clients, colleagues, and family members.