I grew up in a small business. My father, like his father before him, was a truck dealer. As with many kids growing up in small and medium enterprises, I had an opportunity to do most every job in my dad’s store. It was in one of my early job transitions that my father taught me an important lesson that I still pass along to others today – particularly independent business owners.
I had approached my dad with a desire to move along in the informal rotation program otherwise known as working in a family business. I had tired of whatever it was I was doing and was ready for a new challenge. Upon relaying my interest to my father, he asked me a single question: “Have you trained your replacement yet?” I remember thinking he must have been kidding. I asked him who he had in mind. “How should I know?” was what I got in reply. He went on to explain to me that business owners naturally act to minimize risk, that at the moment, I was a sure bet in my current job, and to move me out of it – with no good prospect to replace me – was a level of risk he wasn’t comfortable with. He suggested I return when my promotion was a lower risk proposition.
Most small businesses owners intuitively understand this as it relates to those working in their organizations. I have no doubt that my father was not the first to consider it. However, where my dad and many entrepreneurs miss the boat is in failing to follow this advice themselves. In my work, I almost never meet a business owner whose final ambition is to die at their desk. Nearly all have plans which extend beyond the organizations they’ve built. Whether it’s selling their business, leaving it to a next generation or some other future plan, they’ve contemplated a day when someone other than them will be in charge.
What most fail to fully comprehend, however, is that maximizing the success of those plans hinges greatly on their ability to train their replacement. It’s still about reducing risk. Because with reduced risk comes higher transaction values, more profitable successors, reduced associate turnover, improved customer retention and other goodness. All of which is facilitated by owners who make certain to train their replacements. According to Bruce Sherman, Partner at PwC, “Management quality and depth is critical to investors. A weak bench results in lower valuation for investors.” But while it is so obviously fundamental, the majority of SME owners do not take the time to ensure that they have identified and trained their successors.
In a recent online Harris Poll for Nationwide, 3 in 5 small businesses reported not having a succession plan in place. A similar study by Wilmington Trust found that 58% of small business owners have no succession plan. Other surveys detail similar or worse findings. When asked why, most owners cite busy schedules or a belief that succession planning is not necessary. Often though, what lurks behind these more superficial answers are more emotional responses rooted in fear or a lack of trust.
For many small enterprise owners, the notion of training someone to do their job involves apprehension around whether any person is capable of doing their job. There are also barriers to trust. For most SME proprietors, these businesses are their life’s work. Many describe them as another spouse or child. So, for them to turn over even small amounts of their responsibility to anyone is a big deal. They need to feel a sense of absolute trust in the individual(s) they are handing the keys to – even if it’s just for a few days at a time. But those who solve for these fear and trust issues create healthier businesses that attract greater sale prices and/or thrive after they leave. So, how do these more successful owners make the turn?
Step one is to create space between emotion and action. It’s OK to have fear and trust issues. But it’s not OK to let them hold you back. Operate from an opening assumption that the act of training your replacement will allay these emotional objections and agree with yourself to proceed.
Next, identify candidates for the functions you perform. If there is/are no qualified candidate/s currently in your organization, hire them.
Then, with your HR team, if you have one, assess the capabilities of the identified candidate(s) against the required responsibilities of your role. Next, develop a learning and development plan for any gaps and begin working to train against them. Be patient. You likely didn’t learn everything about a decades-old business overnight; they won’t either. Remember, everyone stands to benefit from their success. The more they learn, the more successful you will be in the long run. Teach accordingly.
Periodically, see how things are progressing by going away for a day or two. Resist the urge to call in every hour. These short trips away will give you an excellent sense for what has been learned so far and what still needs attention. Eventually, you’ll be able to stay away for longer and longer periods of time until you’re satisfied that you have, in fact, trained your replacement.
Please note that if any of this seems at all overwhelming, you don’t need to go it alone. Many firms, like mine, as well as other business brokerage, investment banking and management consultancy firms can assist you with succession planning activities and can further help you with developing a timeline for exit, valuation, and other related considerations. What’s most important, whether you develop your successor alone, or with outside help, is that you, in fact, do just that.
In doing so, not only will you be enhancing the long-term value of your business, but you will inadvertently be growing trust within your business by the armload. People learn by watching and imitating their leaders. As others in your organization see you trusting more, they will too. As trust grows in your business, you and your team will accomplish more and do so more quickly, you’ll become more resilient, and you’ll win more often. And those at home will notice too.
You’ll suddenly have more time to spend with those who truly matter, those who have made what you’ve accomplished possible, and who maybe you haven’t seen as much as you’d have liked over the years. And before you know it, that really big promotion, the one you’ve been after for a long, long time, in your job as a spouse, a parent, a grandparent or a more involved member of the community will finally become a reality. All because you put aside issues with fear and trust long enough to train your replacement.