Consultation Services by Otter: Aid provided by Fabian Zamzau to entrepreneurs in efficiently and securely executing their life's endeavors
Delaying succession planning can lead to the unfortunate sale or liquidation of a business at a loss. In smaller businesses, setting up a company so that it can function stably even without the founder or current owner is essential. Otter Consult GmbH, a company that accompanies entrepreneurs throughout the entire succession process, emphasizes the importance of a structured approach to succession planning.
Key Steps to Managing Succession Professionally
- Conduct a Thorough External Search for Successors
Finding the right successor is crucial. Look for candidates with proven experience relevant to your industry who also align with your company’s culture, values, and work ethic. Objective criteria should be used to evaluate leadership potential and compatibility.
- Develop a Comprehensive Transition Plan
A clear and detailed transition plan is vital. This should outline steps and timelines for transferring leadership and ownership, including mentoring, coaching, and gradually increasing responsibilities. Transparent communication with all stakeholders, such as employees, customers, and suppliers, is necessary to maintain trust and support.
- Conduct Trial Runs to Validate the Successor
Before fully stepping back, allow the successor to lead critical activities like financial reviews or meetings in a controlled way. This de-risks the transition and reveals areas needing adjustment.
- Update Legal and Financial Foundations
Ensure all legal documents, such as operating agreements, shareholder buy-sell agreements, powers of attorney, and key person insurance, are current. This protects decision-making continuity and clarifies ownership/control structures.
- Build an Advisory Team to Support Transition
Assemble a team of experienced advisors, including legal, financial, and industry experts, to guide the succession process, manage complexities, and safeguard legacy and growth.
- Make Succession Planning a Living Strategy
Regularly review and update the plan to adapt to internal changes or external events such as tax law changes or shifts in ownership. This ensures the plan remains relevant and effective.
Navigating the Succession Process
Many entrepreneurs hesitate to inform their team about planned succession due to fears of uncertainty, rumors, or turnover. However, clear and adaptive communication, both internally and externally, is crucial during the succession process. In some cases, a discreet search for a successor through experienced M&A advisors may be recommended.
Hybrid handover models, such as a journeyman acting as a business manager while the outgoing master continues to provide consultative support, can be beneficial in certain industries. External options, such as MBI candidates (experienced leaders with a concrete interest in taking over a company), should be considered when family succession is not possible.
Preparing the Business for Sale
When the time comes to sell the business, it's important for the company to appear active and future-oriented. This includes targeted development and retention of key personnel, digitalization of central processes, a professional external appearance, and a modern, functional infrastructure.
Professional buyer outreach protects against unserious offers and contributes significantly to making the succession process predictable and successful. Early planning provides a significant advantage, ideally starting three to four years before the handover. Lack of transparency can lead to long-term mistrust.
Otter Consult GmbH works closely with specialized lawyers and tax consultants to ensure a smooth succession process. A clear search strategy, including digital platforms, personal recommendations, and targeted work with specialized M&A advisors, is needed. A tailored communication strategy is crucial in such situations.
In Conclusion
By following these structured, well-documented, and communicated steps, entrepreneurs can manage succession professionally even when no internal successors exist, preserving business value, protecting stakeholders, and ensuring a sustainable legacy.
- The right successor for a business should be found through a thorough external search, looking for candidates with relevant industry experience and a cultural fit with the company.
- A comprehensive transition plan should be developed, outlining steps and timelines for transferring leadership and ownership.
- Before fully stepping back, the successor should be given trial runs to lead critical activities and reveal any areas needing adjustment.
- Legal documents, such as operating agreements, shareholder buy-sell agreements, and powers of attorney, must be kept current to protect decision-making continuity.
- Assembling an advisory team of legal, financial, and industry experts can help guide the succession process and manage complexities.
- Succession planning should be a living strategy, regularly reviewed and updated to adapt to internal changes or external events.
- Clear and adaptive communication throughout the succession process is essential to maintain trust and support among stakeholders.
- Hybrid handover models can be beneficial in certain industries, such as a journeyman acting as a business manager while the outgoing master continues to provide consultative support.
- External options, such as MBI candidates, should be considered when family succession is not possible.
- When selling the business, it's important to make the company appear active and future-oriented, including targeted development and retention of key personnel.
- Professional buyer outreach can help make the succession process predictable and successful, ideally starting three to four years before the handover.
- A tailored communication strategy is crucial when dealing with the succession process, working closely with specialized lawyers and tax consultants.
- Sustainable living practices, such as digitalizing central processes and maintaining a modern, functional infrastructure, can help the business appeal to potential buyers.
- Electric vehicles can be a factor to consider when preparing the business for sale, as they are becoming increasingly popular and can contribute to the company's modern appearance.
