If you run a business, then you’ve spent years – likely decades – carefully nurturing it through the many trials and tribulations that come with modern business. It is, quite literally, your life’s work, so naturally as you start to look towards retirement the question of what happens to the business once you’re travelling the world or enjoying that beachfront getaway will start to weigh heavily on your mind.
Businesses that don’t have a clear line of succession and a properly-realised succession plan tend to falter. Research shows that in the event of an untimely passing of a founder or business owner, the typical business loses 60% of sales and jobs are cut by 17%.
There may be a way back for the business, but it will be a difficult one.
Of course, retirement doesn’t need to be such a sudden and unexpected hit to the business. The risk of such extreme disruption can be mitigated by taking the right steps towards succession early, so that the business is prepared for a smooth transition to the new owner. And so, at the same time that you start your retirement planning, make sure the business transfer is part of that planning.
Four steps towards succession planning
Incredibly, given the company risk involved, only around 14% of business leaders actually have a succession plan in place. This is particularly startling when you consider that succession planning is a fairly straightforward process.
It takes a little time to prepare and organise, but when approached in the right way it doesn’t need to be a laborious process.
1) Define the job and write a plan
Make it clear what primary and secondary characteristics are important in making the business succeed, and be sure that you’ve laid out your five and ten year vision for the company. Finding a successor that can complement and enhance your vision for the company relies on finding someone that is aligned to it.
2) Look inside the company for a replacement first
Someone who has worked at the company over many years has almost as much of a stake in it as you do, and they certainly understand the company and people. Rather than risk an external CEO, that might prove incompatible with the company culture and approach, look to promote someone internally first.
3) Make sure the compensation package is attractive
Regardless of what you pay yourself, take a look at the market conditions and make sure that your successor can expect a package that is in-line with current expectations. After all, you want the best person for the job, so you need to make sure you’re offering the best job to the person.
4) Make sure there’s a long shadowing period
Have the next CEO or candidate shadow you to learn how you work, and develop a first-hand understanding of the many nuances of the job that can never be accounted for in the succession plan. Start transitioning responsibilities to them before you make your final exit.
What’s next after you retire?
The average CEO steps down from their role at the age of 62. This is quite young for retirement these days, though the stresses of running a company do take their toll, and many head into retirement due to this.
Transitioning to retirement can be a challenge for someone as committed to their work as a company leader. The loss of a work/life structure can lead to identity disruption and a struggle to connect to the world.
There are a couple of strategies here that many former CEOs use to keep themselves sharp and engaged post-retirement:
Former business leaders have a wealth of experience and expertise that can be intensely valuable, and so many find themselves opportunities in consulting. The benefit of this is that they can set a much more relaxed schedule, fit work in-between more extended personal pursuits and work with less direct responsibility. Many CEOs end up consulting back to their former company, and this is a useful extra step in future-proofing the company and ensuring it remains in safe hands!
Many former business leaders enjoy building the next generation of leaders. Rather than provide consulting services to businesses, they may instead identify a future leader and take them under their wing. This might be unpaid work (and often is), but for a returned CEO with a strong pension plan, this is an opportunity to transfer knowledge and ensure their legacy and make sure that the company has a long and healthy future ahead of it.
Think about your succession plan today
CEOs and business leaders usually get a sense for when they’re getting close to retirement. This doesn’t necessarily mean a complete end of work, and indeed many find “retirement” to be an opportunity to do some of their best thought leadership.
However, to ensure the ongoing health and stability of the business that you’ve worked so hard to build, having a clear succession plan prepared and in place well in advance is an important stage in your career.