The Key Components in Succession Planning, According to Study

by | Blog, General Business

As a succession planner, it is essential to identify any factors that could potentially affect the business’s long-term success. Advisors must evaluate the organization from all angles to gain a comprehensive understanding of the organization’s environment. The Succession Matrix® is a valuable tool to identify opportunities and risks, ensuring all family, leadership, and business issues are considered. By evaluating potential risks and strengths, advisors can create strategies to achieve their client’s goals.

What is the Succession Matrix®?

The International Succession Planning Association® Board identified the Succession Matrix as a set of key planning areas that could affect the continuity of a business through the next generation. Depending on the seriousness of the situation, any one of these areas could impair a business owner’s chances of achieving their succession objectives.

The interconnectedness of the Succession Matrix factors adds to the complexity of achieving the owner’s long-term goals. Strengths in one area can help to offset deficiencies in another, while a lack of progress in multiple areas may indicate that considerable progress is needed for business succession to be achievable.

How was the Succession Matrix developed?

The ISPA®’s extensive national research and study program identified the key elements for successful succession planning. Drawing on the collective experience of over 100 years and working with 2,500 business owners, the panel of experts – comprising of management consultants, industrial psychologists, a family therapist, a tax attorney, a certified public accountant, and financial planners – evaluated 37 factors according to their impact on the succession planning process and narrowed down ten key elements for an optimal succession plan:

1. Owner Motivation and Perspective
2. Personal Financial Planning
3. Business Structuring
4. Business Performance
5. Strategic Planning
6. Leadership & Management Continuity
7. Management Synergy & Teamwork
8. Successor Identification & Preparation
9. Family Dynamics
10. Family Governance

Why should you understand the Succession Matrix®?

Due to the interconnectedness of business and personal issues, these areas of the Succession Matrix will impact your role in the planning process. By understanding all the factors involved, you can be an influential advisor who can effectively address your client’s needs and display your professional expertise.
Gaining a comprehensive understanding of the Succession Matrix can give you the power to take charge of the planning process, safeguard your interests, and establish credibility with referrals to other professionals.

How to Apply the Succession Matrix®

It’s worth noting that the Succession Matrix® likely identifies areas of action outside the scope of your specific expertise that may seem irrelevant to the delivery of your core services. However, what may seem out of “scope,” these action items still influence your role in the planning environment due to the interdependence of technical, business, and personal issues. Therefore, it’s essential to be conversant and aware of all issues to position yourself as the sought-after “quarterback” advisor who can facilitate any of your client’s needs while showcasing and deploying your expertise.

Call in the Cavalry: When to Seek Support from Other Professionals

Suppose you find yourself in a circumstance outside your comfort zone. In that case, it’s crucial to reach out to your network of supporting advisors, the network within the Business Transition Network, or the network provided by the ISPA®. The most influential business advisor is the one who knows when and how to promote a qualified expert to address a specific need. Doing so will generate additional billable hours or opportunities to place products and create a value-added planning platform for earning referrals.

Providing Value to Your Clients Through a Comprehensive Understanding of the Succession Matrix®

Providing the highest value to your client requires fully understanding all issues that impact their planning goals. In return, you will establish yourself as their “go-to” person for any issue and develop a working relationship with partner advisors who will likely refer business to you.

Taking the time to comprehensively understand the Succession Matrix® is crucial for any business advisor. Utilizing the Succession Matrix® enables you to address all your client’s needs, showcase your professional expertise, and establish credibility with referrals to other professionals.

Succession Planning Resources

Written By: Kendall Rawls

Kendall Rawls is Director of Development for The Rawls Group, Business Succession Planners and the International Succession Planning Association.

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