Succession planning— the grown-up conversation all business owners know they need but often avoid. It’s like that nagging reminder, “We should really start saving for retirement,” and “Do I need this second boat?” Every business owner needs a long-term exit strategy. It’s where sound business planning begins.
Franchisors that support business transitions enhance their brand value. They assist franchisees in planning every phase of their journey—from entry to exit. They know the best way to build enterprise value is to start with the end in mind.
They openly discuss four essential questions each year; whether you have a franchised business or an independent one, these four questions and our “Best Practices for Building a Legacy Business” are for you:
- Why are you in business? What do you want to achieve?
- How does your business life align with your personal goals today?
- What financial goals must you reach to move forward confidently?
- What’s your exit strategy? Will you sell, transition to an employee or family member, or continue the business as an absentee owner?
START EARLY: THE EXIT PLAN BEGINS AT ENTRY
The best time to start a succession plan is on day one. Treat the exit strategy as part of the entry plan. Set financial goals and a growth roadmap, building profit with intention. Your timeline for creating business value through profitable growth begins by knowing when and how you’ll transition.
BEST PRACTICES FOR BUILDING A LEGACY BUSINESS
- Formalize the Plan
A formal, structured succession plan is essential for a smooth transition. It outlines who will assume leadership roles and how responsibilities will be transferred, reducing disruptions, preserving operational stability, and maintaining investor confidence. This preparation supports steady cash flow and profitability during planned or unplanned transitions. - Consider Tax and Estate Planning Options
Work with a financial advisor, estate attorney, and tax expert to craft a transition plan aligns with personal goals and minimizes tax. If you’ll finance some of the buyout, avoid unmanageable debt payments that will kill company cash flow. Proper planning protects your hard-earned wealth and ensures the business thrives without you. - Document Everything
A comprehensive playbook is the ultimate gift for your successor. Document the company mission and vision, business processes, vendor relationships, operational strategies, and the “secret sauce” that fuels your success. - Conduct Regular Financial Health Checks
Clean books, manageable debt, asset efficiency and a trend of increasing sales and profits make your business appealing to potential buyers. A well-organized operation is a high-value turnkey opportunity, not a bargain hunter’s fixer-upper. - Embrace Transparency
Clear communication is vital. Ensure your leadership team, family, and other stakeholders understand your plans. Transparency eliminates guesswork and ensures smooth execution.
Neglecting Succession Planning is Risky
Imagine a multi-unit owner with 20 thriving locations and no succession plan. When leadership changes unexpectedly (in the eyes of the team), the fallout begins with confusion, insecurity and rumors that erode trust and culture. Productivity, the driver of all profit and cash flow, suffers. Next goes the bottom line and the bank balance. Vendors grow uneasy, and competitors seize the opportunity.
Avoid the drama. Start with the end in mind.
LOGISTICS ARE IMPORTANT, BUT WITHOUT CONTINUITY OF LEADERSHIP, THEY WON’T MATTER
Developing a pipeline of future leaders is crucial for long-term success. Mentorships and leadership training ready successors so the machine runs efficiently without the owner at the helm. Invest in talent to improve decision-making, encourage innovation, and boost profitability. Not doing so leaves businesses floundering when owners transition. Investors know it, and they won’t pay handsome multiples for enterprises that lack management depth.
My Advice:
Identify Successors Early – Whether it’s a family member, key employee, or external buyer, determine who will lead when you step aside and invest in their development.
Groom Successors Gradually – Train them over time, increasing responsibilities and providing hands-on experience. By the time you transition to your next great adventure, they’ll be ready to lead.
Unprepared successors cause stagnation through mismanagement. It’s not their fault. They don’t have experience making crucial strategic choices, fostering growth, and maintaining profitability through changing times. Astute leaders transition early while they are still accessible to mentor success.
WHERE DO CORE VALUES FIT IN?
A legacy business is defined not only by its profit but by its values and culture. Continuing the healthy vibe that makes a business special is important. Overtly communicating and reinforcing core values allow successors to embody them. With values upheld, customer loyalty is enhanced by fostering repeat business, and employee trust is cultivated, fostering a positive work environment; two essentials for sustainable growth.
A Blueprint for Continuity
Making a multi-unit franchise a legacy business requires more than short-term profit management. It demands formalized plans and strategic investments in people, culture, and adaptability.
Your foundations:
- Identify a timeline (it’s okay to change it later)
- Implement a structured succession plan.
- Foster leadership and mentorship programs.
- Uphold core values and cultivate open communication.
- Repeat
A well-planned legacy ensures the next generation is ready to take the reins and drive the business to new heights. It secures your enterprise’s position in the market for years to come. Because true legacy is more about the future than the past.
RESOURCES FOR YOU AND YOUR TEAM
Prepare your next-generation leaders to make informed, savvy financial decisions. The Profit Soup Online classroom has 14 courses, totaling up to 12 hours of user-friendly learning. Available 24×7. Learn more here.