Succession Planning for Business

Understanding Business and Internal Succession

Succession planning consists of two key components:

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1. Business Succession – The transition of business ownership through sale, family inheritance, or internal promotion.

2. Internal Management Succession – The development of internal talent to step into leadership roles over time.

The white paper stresses that linking business succession with internal succession is critical to long-term success. Without internal leadership development, a business cannot sustain itself post-ownership transition.

The Key Challenges in Succession Planning

1. The Missing “Why”

One of the most common mistakes in succession planning is failing to ask why a succession plan is needed. Businesses must consider both push factors (e.g., an ageing owner, industry shifts) and pull factors (e.g., new growth opportunities, investor buyouts).

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If the purpose of succession planning is unclear, the plan itself can become ineffective, leading to poor decision-making and suboptimal outcomes.

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2. The Failure to Balance Business as Usual with Strategic Planning

Many businesses struggle to implement succession plans while maintaining ongoing operations. This results in one of two extremes:

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• Over-prioritisation of daily operations causes succession planning to be neglected.

• Too much focus on transition planning leads to instability in business performance.

A well-structured succession plan must balance short-term operational needs with long-term strategic objectives.

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3. Lack of Management Readiness

Succession planning is not just about replacing an owner or CEO—it requires developing a pipeline of capable leaders. Unfortunately, many businesses fail to prepare managers for senior leadership roles, leading to skill gaps and leadership deficiencies.

The Three Stages of Effective Succession Planning

The white paper outlines a three-stage framework to create a successful succession plan:

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Stage 1: Understand the Goal

Before implementing any succession plan, businesses must clearly define their objectives. This includes:

• Identifying the ideal future state of the business.

• Understanding whether ownership transfer, leadership development, or both are required.

• Analysing business continuity risks to ensure operational stability.

A common mistake is assuming that succession planning is only for retirement purposes. It is about building a resilient business that can thrive beyond its current leadership.

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Stage 2: Develop a 90-Day Plan

Succession planning should begin with a 90-day action plan to establish immediate priorities. This includes:

• Identifying key leadership gaps.

• Mapping out talent development strategies.

• Ensuring business continuity during the transition.

This structured approach prevents succession planning from becoming an abstract, long-term concept and turns it into a tangible, actionable process.

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Stage 3: Implement the Internal Management Succession Plan

Once a foundation is set, businesses must actively develop and transition leadership roles over time. This includes:

• Leadership training programs to prepare internal candidates.

• Clear governance structures to ensure transparency in decision-making.

• Regular milestone reviews to track succession progress.

Unlike business succession (which can be a one-time event), internal succession is an ongoing process that must be nurtured continuously.

Depending on a business’s strategy, succession planning can take different forms:

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1. Stepping Up

• Growth-focused succession where leadership is actively enhanced to expand the business.

• This may include acquisitions, new market expansion, or scaling operations.

2. Stepping Back

• Partial transition of ownership, such as selling shares while remaining involved in strategic decision-making.

• Often involves professionalising management teams to maintain operational efficiency.

3. Stepping Out

• Full ownership transfer, whether through sale, buyout, or leadership transition.

• Requires careful planning to maximise business value before exit.