What is succession planning and how does succession planning work? Those are the two questions you're looking for answers to and I've got them for you today on this edition of the Inside BS Show. Hey now, my name is Dave Lorenzo. I'm the Godfather of Growth and today we're talking about succession planning.

So you're wondering what is succession planning and how does succession planning work? Succession planning is probably the most valuable aspect of any business and I know that's probably shocking to you. Here's the reason why. What succession planning is, is essentially finding a replacement for every role in the organization.

So when you start a business, you're there finding a client or maybe you have a client and then you provide a product or service to the client. And when you start out, you might be doing this yourself. You find the client, you provide the service.

That's not a good business model. That's a good model for a job. You're doing work for a fee.

The minute that you replace one of those two aspects, you either have somebody else find the client or you have somebody else provide the service, you are doing succession planning. You have found someone to succeed you in that role. Your sales process is finding the client.

If you find somebody else to do that for you, you've had a successor come in and become the salesperson instead of you. If you find someone doing the service delivery, you found someone to do that instead of you. You found a successor in that area.

You've planned for the succession of that role. That's what succession planning is. And if you want a real business, you're going to find successors for every role in the organization.

Let's say your business is a year down the road now and you've got three salespeople and you've got five service delivery people. If one of your salespeople decides to quit, you have to be able to fill that role. So you're going to train a person on the service delivery portion of your business to also sell part-time.

That's the succession plan for if someone decides they're going to leave that role. Succession planning is the most important thing you can install in any business because it is what is required to remove the owner from the day-to-day operation. Zooming back at a high level, if you're an entrepreneur, your goal for your business is for it to operate without your involvement.

We spend so much time as business owners thinking about the Michael Gerber e-myth philosophy. This is I want to work on my business and not in my business. Both of those things are bad.

You want to be above the business. You want to be the investor who takes monthly or at worst quarterly distributions from the business and you want to be able to watch that business appreciate, watch that business grow in value over time without your day-to-day involvement. That's what an investor does.

An investor puts resources into something in the hopes of those resources growing and expanding and producing income and then eventually being able to be sold for more value than they originally invested. You as a business owner only get to that point if you replace yourself in the business and that requires a succession plan. So when you ask what is succession planning and how does succession planning work? Succession planning is preparing for the replacement of every individual in every role in the organization starting with the entrepreneur, starting with the founder, starting with the CEO.

If you envision the business like a pyramid, you start at the top and you work your way down the pyramid preparing other people to take the place of the person at the higher level in the pyramid. So when we start succession planning with the CEO, we have to have replacements prepared for the CEO over the life of that business. We then have to prepare replacements for the people who are in the C-suite, the chief operating officer, the chief financial officer, the chief marketing officer, the chief people officer, or the chief human resource officer.

We also have to prepare people for the level below that, the directors and then the level below that the vice presidents and then the level below that the managers and then the level below that the frontline employees. All roles should have someone being prepared to move up into them at any point in time. Now answering the question what is succession planning? It's filling every role in the organization before that role becomes vacant.

How does succession planning work? Here's my model for how succession planning works. Every person in the organization has three different responsibilities. Responsibility number one is to do the job today to provide for the outcome that people need today.

So if you're in a customer facing role, you provide a service or a product to the customer and you fulfill the key performance indicators in doing that. If you're in a support role, you provide support to other departments and you fulfill the key performance indicators that support those people. That's one part of your job but it's only one third of your job.

Your job is important so if you can't be here tomorrow, we need someone who can step in and do the day-to-day work. So the second part of your job is to make sure that if you can't come in tomorrow and you're going to be out for a day, we have a continuity plan which is part of succession planning for someone else to be able to do your job at about 50 percent of the capability that you can do it. They can do the day-to-day, they can't do the long term.

The other part of that is if you're on a track to be promoted, you need to have someone who can do your job at 80 percent capability so that they could be a permanent replacement for you when you do get promoted. So your one third of your job is doing things for the outcome of the business today. The second third is preparing for if you're not here short term and long term and then the third third of your job, the third part of your job is for you to be able to move into the next role.

So it's your responsibility to get yourself ready to move into the next role. So you're fulfilling your responsibilities today, you're helping someone else get ready to replace you tomorrow, long term and short term, and you're preparing yourself to get ready to take the next step. Some jobs that's going to take two years, other jobs it may take 18 months, but in almost all cases it takes at least 18 months to two years to train your replacement and to get ready for the next job.

So you are always growing and improving, you are always bringing the next generation up, and you're always fulfilling the needs of your job today. That's how succession planning works. Good businesses have this continuous improvement process in place constantly.

Businesses that offer the most value, the most return on their investment have this in place. So if you're a solo practitioner today, you're a business of one, you need to first start off by deciding are you going to outsource sales, are you going to outsource service delivery, and if you outsource one of those two things, you've got three months or six months at the most to bring that in-house and have somebody ready to do that. After you bring one of those things in-house, then you go to work on the other, and then before you know it, in a year there's three of you working in the business.

One is selling, one is delivering, and you're the CEO continuing to add more people on each side. That's what succession planning is. Succession planning is truly growth planning for the business.

So if you're wondering what succession planning is and how it works, that's the model that makes the most sense for you, the business owner, for you, the entrepreneur. And if you want to discover more about succession planning in a family business, I want you to go to where you got this podcast and look up succession planning in a family business. Just type that into the search bar.

Under the Inside BS show, you will find over a dozen different shows on family business growth. You need to listen to all of these. I am Dave Lorenzo, and I'll be back here again tomorrow with another edition of our show.

Until then, here's hoping you make a great living and live a great life.