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Covid19 Requires CEOs to Update Business Succession Plans

CEOs of small-to-medium sized companies are often hesitant to undertake succession planning due to many things they need to take care urgently. This is quite justified given a slew of decisions which need to be made everyday. Despite that, they need to plan and update their current business succession plan. Among many things linked to succession, not only must the current CEOs consider the future of the business but also their own involvement and ways of succession.

According to the recently conducted survey in 2021, as high as 76% of family business owners claim that business succession is considered important of which the 38.2% thinks it very important. (source)

Approaching succession planning in distinct steps makes it clear to the current CEOs what needs to be prepared and accomplished. There is no one right way to do it. But here is one of the primary steps to create a formal business succession plan the current CEOs need to take on and update.

First and foremost, CEOs need to define the vision for the future of the business. They would need to think about where the business is headed. What plans and matters would they need to include and rethink over? One of the plans some say they would consider is to simply shut down the company someday if they believe the family business is very much reliant upon the unique skills of the current CEO and the skills can’t be handed over to anybody in the organization. Or the amount of inheritance tax is too high to manage and pay to the tax office, or it is too hard to find the right successor for the business. They may think it most realistic outcome if they study on this deeply. But they need to think what would be the best option. The other plan they prefer is to hand the management over to their next generation as they planned, which may be most preferred by the owner of family businesses for many companies. They sometimes consider to transfer it to other family members if their children are not ready or qualified enough to be their successor. Besides, third parities like employees or outsiders are also considered as they could be interested in purchasing the company.There are many things to consider indeed.

Formalizing the succession planning would be of great help to make the business succession successful. Step-by-step approaching includes many formal processes such as  creating necessary documentation, involvement by the current CEOs and others, legal due process, shareholder agreement, candidate developing process, successor finalization process, public announcement, and so on.

Covid19 may spur the reconsideration of the already-set business succession plans. This means the current CEOs, who is facing so much complicated matters driven from the pandemic Covid19, needs to update their business succession planning if they already have one. Planning for “what if” scenarios would need to be made and shared with related stakeholders for reconsideration. For instance, what if an owner or one of other key employees dies or becomes seriously ill or disabled all of sudden? What if the company is adversely affected by the long-lasting pandemic Covid19 to the extent the company gets itself into the big hole of bankruptcy? What if there is no successor candidate to succeed the business? Closely linked to all kinds of scenarios involving internal and external factors are questions about the future of the company.

“The sooner preparation and updates of business succession planning with professionals, the better the company’s future would be.”

Written by Jungwan Shin, (Author of “CEO is the future”) from AJPOP Consulting

 

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