In reading about Ron Francis’ promotion to general manager of the Carolina Hurricanes, one paragraph  stood out to me:

Francis, 51, said he had no reservations about taking over a position he has been groomed for in recent years as assistant general manager, director of player personnel and vice president of hockey operations. He also went behind the bench as associate head coach, gaining another perspective. (From the News and Observer, April 29,2014)

Many business owners think succession planning is all financial, but there are significant organizational and management components as well.  It can take years to properly groom, train, coach or otherwise prepare a new owner for the job.

For example, many business owners assume their children or key employees will want to buy the business. It is important to communicate that game-plan early, to make sure the kids or employees actually want it.

If the kids do want it, the owner needs to work out family logistics, such as voting vs. non-voting stock, management, directors, control and capital contributions.

In every succession plan the owner needs to ensure the successor is well-versed in all aspects of the business. An engineer may understand product development   and quality control, but may not understand the sales cycle (and vice versa).

Allow the successor to have decision-making power and authority over time; don’t just turn over the reins one day.  Test their leadership capacity and management style.  Introduce him or her to key customers and venders, as well as the attorney and CPA.

Make sure there are few intangible aspects of the business left unsaid.  Spend time to develop and document procedures, job descriptions and employment policies.  Make sure the know-how and trade secrets are transmitted to the successor.

Review key contracts.  Some may require consent of the other party for a sale of the business or change of control.

Keep good and accurate books and records.  It is essential to determine the true worthof the business, but will also allow a successor to see the profit and cost centers.

In short, although it is important to plan the funding piece of a business succession plan, it is just as important to groom the successor sooner rather than later.