Many successful businesses initially started out as sole proprietorships but have grown to establish and maintain a legacy.
Amazon was initially set up by the founder as a single-owned business. However, years later, Amazon is one of the largest multinationals. When Walmart started out, it initially had only one store in Arkansas.
Right now, the Walmart has over 10,000 stores globally. E-bay started out as a single-owned business but today it has reached great growth and expansion.
All these examples demonstrate that sole proprietorships have the potential to grow and even outlive the founders ‘presence in the business. The secret to establishing and maintaining a legacy is to have a good growth and expansion strategy.
Succession planning is one of the important factors in helping a business reach growth and expansion. A good succession plan will enable the business to survive in posterity. Here are a few tips on succession planning.
First, write out a good succession plan that includes the goals and objectives of the business, vision and mission, identification of potential successors and even timing.
A succession plan ought to be written many years in advance of the actual succession and exit from the business. It is advisable to consult experts so as to write a good plan. It is better not to have a succession plan than to have a bad one.
Once the plan is in place, then succession can occur in phases. Business succession can take several years and happens in phases.
One you identify potential category of successors then you can go to the next phase -training, capacity building and mentorship.
It is crucial to prepare your potential successors to take over the mantle when the time comes. In law firms, for example, many partnerships ensure succession planning by admitting new partners.
They communicate their intention to admit new partners and outline the criteria of admission into partnership way before the dates of admission into partnership. In this way, the young advocates begin to prepare early.
Therefore, it is good to communicate your succession plan to the potential successors early enough and also to begin to prepare them to take over the mantle.
When I did a master class in leadership, one of the case examples we studied was the succession plan of Apple Inc. We learnt that Steve Jobs, Apple founder, mentored Timothy Cook way before his demise such that Apple had a seamless transition.
A good succession plan will set aside resources for training and capacity building for the next cream of leaders. The successors need to know the ins and outs of the business. They need to be equipped with essential leadership skills.
At the time of exit it is important to undertake a valuation to establish how much the business is worth. The founder needs to be compensated for all the years put into the business and a valuation will help establish a reasonable value.
The successors can pay the founder out, either immediately or over a long period of time. The founder needs to protect his founder interests and there are many ways of doing that.
When time comes for exiting the business, then the business stakeholders ought to be informed. These stakeholders include other staff members, clients and others. This will, uphold good stakeholder governance and maintain stakeholder loyalty.
