If the topic of choosing a business successor is one that you’d rather put away for a rainy day, this article is for you. Here you’ll find two lists: the five perspectives shared by business owners who have successfully transitioned their businesses to successors and the five most important characteristics these owners looked for and found in their successors.
The second list will help you to evaluate possible successors as objectively as you can. More importantly, incorporating it into a transition process that puts relationships first gives you peace of mind that your successor is the right one for you (and you for them) and your business.
Let’s begin with you, a business owner thinking about possible successors. What characteristics should you possess before you start to make a list of characteristics your successor should possess?
• Abundance: First, consider how very fortunate you are. Choosing a successor is not a dilemma for owners of unsuccessful businesses because there are usually no interested successors.
• Leadership: You control the successor selection project. Please do not let anyone pressure you into naming a successor, and equally important, don’t put off making a choice due to fear of making a mistake or destroying relationships. The purpose of giving you a list of characteristics to look for in successors and of designing business transitions that put relationships first is to prevent both of these outcomes.
• Confidence: Again, you have created a successful business. You have calculated risk and made far more correct choices than incorrect ones about what products/services to develop and how to deliver them. Choosing a successor? You’ve got this.
• Humility: Your choice of a successor will affect your business, legacy, employees, family and possibly community, as well as your own financial security. This is a big deal, and you are not alone. As business owners, we are so close to our businesses that it can be difficult for us to step back to see the broader picture. Our advisors, if they are future-looking, help us to spot trends and alert us to changes (e.g., legal, tax, regulatory, competitive) that can affect our companies and protect us from undue risk. When considering possible successors, rely on your advisors.
Approaching the choice of a successor with confidence and humility emboldens many owners to move forward.
Now we turn to the most important qualities that make a great successor.
Top five characteristics in a business successor
1. Ability to learn how to do what you do
Great successors are not carbon copies of great predecessors; instead, they have the ability to learn how you do what you do. If the qualities you’ve put on your “ideal successor” list bear a striking resemblance to your own characteristics, please set it aside for a moment, and meet fictional owner “Giselle.”
Giselle was a brilliant engineer who started her communications company shortly after graduating from college. She anticipated the explosion in cellular communication and began to construct radio towers and antennas. Thirty-five years later, she had a nice asset in her radio and cellular towers and one of the best reputations in the radio industry.
Giselle’s son, “Gordon,” did not follow his mother’s footsteps into the hard sciences. Instead, he put his gift for numbers to work in finance and accounting. He became a CPA and then went on to become the CFO of a furniture manufacturing company. When he indicated to Giselle that he was interested in running her company, she was thrilled. She was also uncertain because she could not imagine how anyone but an engineer could run the company successfully.
Gordon was not an engineer like his mother, so we asked her whether he had leadership and people skills similar to hers. He did, so she could check that box. Giselle was confident that once Gordon understood how to do what she did (drawing upon her knowledge, wisdom and practices), he would be able to drive the business forward and build on her success.
The “right” successors have their own skills and their own definitions of success. Pushing for an exact replication of your skills and methods may not work. Recognizing your successor’s abilities and building upon them does.
2. Willing and eager to assume ownership
We talk to owners a lot about their next adventures: what they want to do and how they want to live after they leave their companies. Next adventures are equally important to successors. You want a successor whose dream it is to own and run a business. And not just any business — yours.
3. Fits with your timetable and you with theirs
It is not unusual to meet 65-year-old owners who want to wait to name a successor until their 15-year-old offspring are old enough to join the family business. More often, however, we watch 45-year-old offspring grow frustrated by their parent’s unwillingness to turn over the reins of the business. The common problem for both is the timetable: You are looking for a successor whose timeline aligns with yours.
4. An entrepreneurial ability to recognize new opportunities
The person who steps into your (very large) shoes will encounter opportunities that will differ from the opportunities during your tenure. Their ability to recognize opportunities will play a huge role in your company’s future success.
5. An entrepreneurial openness to new challenges
To take advantage of an opportunity or meet a challenge, entrepreneurs:
• Embrace new ideas.
• Can tolerate uncertainty.
• Understand that nothing goes as planned.
• Do not fear failure.
• Learn from their mistakes.
Having this list of must-have characteristics for successors removes some of the emotion from the selection process.