For many years this has been a drum I've been beating. I'm blessed to work with so many great founders and entrepreneurs, many of whom think they are bullet proof. Sadly they are not, nor are they always the best leader or CEO at every stage of growth, from start up to exit. I think it is irresponsible for any leadership team, board or investor, to not consider succession planning, for both the unexpected, like illness, to the expected, giving yourself time to look at what skills, and what type of person your business will need for the next stage of growth. You may need to add to, or change around your management and founding team. Be prepared, think of the future, plan to succeed, plan succession.
We also found that 63% of private companies did not have a CEO succession contingency plan in place, and 69% of companies with less than $50 million in annual revenues lacked a plan. Succession planning was more common among larger firms, but the need for a succession plan is often more acute in small firms, especially start-ups. As one start-up director said, “We have significant key-man risk, as this is a start-up that monetizes the thought process and experience of the founder.” Moreover, when the pool of internal executives is small, boards need to think creatively about back-up plans and ways to divvy up critical responsibilities to ensure business continuity.