Succession planning for businesses (with expert tips and free template)

As your startup or small business grows, it’s inevitable that there’ll be a change in leadership dynamic. You might need to bring in external leaders to drive growth, or encourage your first hires to step up into a leadership role.

This is something we’ve experienced at Charlie. Our leadership team now is a blend of early team members, external hires and people who’ve been promoted within the company. Our leadership roles have developed over time, and with that came a need to plan for what these roles would be and who would excel in them.

Succession planning in a small business can be challenging, as you don’t have access to the same resources or talent pool as a big company. Instead, your strengths lie in flexibility, personalisation, and the ability to make decisions quickly.

In this guide, we’re sharing how to approach succession planning as a small business. We’ll explore what the process involves, and share our personal experiences with planning for the future and how you can handle the process with confidence.

What is succession planning?

Succession planning is where you identify people within the company that could step into a critical role when it becomes vacant. The process involves deciding what your critical roles are, the skills required, who could reasonably move into them, and what support your future leaders need to get there.

While you might want your talented team members to stay with you forever, they’re likely to move on at some point. It might not even be that someone is leaving — you may simply be creating a new leadership role in your growing startup or small business. Investing time in succession planning means you can approach the scenario in a more prepared way, creating a better experience for everyone involved.

What your succession plan should include

As part of this planning process, we recommend putting together a clear succession plan. Your plan should bring all your research together into one organised map for the future. It doesn’t have to be long or complicated, but there are some essential elements we’d recommend including.

Here’s what to add to your succession plan:

• List of critical positions — examples might include COO, managing director, or finance lead
• Current position holder — name the position holder, or leave this empty for vacancies
• Potential successors — list 2-4 potential candidates for the future
• Key competencies for each role — include essential skills and attributes the post-holder should have
• Development plans — include planned training to allow the successor to excel in their new role
• Succession timeline — add a timeline that feels realistic, given the training required
• Contingency plans — actions you’ll take to make sure someone can temporarily step into the role, for example if you have to fire someone unexpectedly.

You can create your plan from scratch, or use this guide and our succession planning template to shortcut this essential step in the talent management process.

Why your small business needs a succession plan

It might feel like succession planning is only for big corporations, but it’s vital to the smooth-running of small businesses too. Critical roles like your leadership team and mid-level management could unexpectedly become vacant, and without a succession plan you’re left scrambling to cover the day-to-day duties while trying to recruit.

With a succession plan in place, you can:

• Act with confidence — navigate an unexpected situation more effectively than if you had no plan in place at all
• Ensure a smooth transition — prepared successors can move into their new role seamlessly and maintain business continuity
• Retain valuable knowledge — successors who are already familiar with the role can use what they know to start their new role with confidence
• Boost morale — employees feel valued and secure knowing there is a clear path for advancement and continuity
• Increase leadership skills — regular training and development of potential successors strengthen the overall leadership within the company
• Be more flexible — adapt more quickly and effectively to changes, maintaining your competitive advantage
• Use resources effectively — planning ahead means you can save time and energy, and route your talent into the roles where they’ll be most impactful
• Promote transparency — sharing your succession plan with others allows you to be transparent and open about plans for the future.

Having a succession plan is a smart move, even if you don’t anticipate your key talent leaving soon. Teams don’t stay the same forever, and planning ahead allows you to continue operating as normal while you prepare the successor to step into their new role.

How to create a small business succession plan in 7 steps

To make it less overwhelming, you can break the succession planning process down into manageable steps. Here’s how to confidently approach succession planning within your small business.

1. Identify key roles

Before you attempt to find successors, you first need to know which roles are critical within your business. Some may be obvious, like the CEO and senior leaders, but there could be operational roles outside of your immediate leadership positions that are crucial to your work — like a software developer, compliance manager, or sales manager.

Work together as a leadership team to identify the key positions within your business, and agree which to add to your succession plan. This process might lead to you creating entirely new roles at the top — like a head of strategy or chief technology officer.

2. Define requirements

Once you’ve decided which roles you need to plan successors for, it’s time to evaluate the skills they’ll need. Consider which skills, competencies, and personal attributes make someone a thriving successor for the role, so you can create a path to support their growth.

Let’s say your head of sales is leaving. Your ideal candidate is a good leader, can plan strategically, and is an expert at managing client relationships. They’ll also need skills in data analysis, negotiation, finance, and technology. Knowing what skills and attributes they need allows you to develop team members now so they can excel at the role in the future.

3. Assess internal talent

With the role and key skills defined, you need to move on to finding potential candidates. We recommend selecting 2-4 people per role, to give you plenty of contingency. You may have potential people in mind, but how do you determine who would be a great successor?

At Charlie, we have a clear evaluation performance for succession planning. It was developed collaboratively between senior leadership and our HR leaders, and is shared transparently with everyone.

Here’s how we identify high-potential employees:

• They consistently maintain high-performance levels — this means always achieving their goals and being able to outperform
• They are recognised by colleagues, subordinates, customers, and management as leaders in their field — feedback from others shows that the candidate has excellent leadership and teamwork skills
• They should consistently demonstrate our high-performance behaviours – drive for results, be humble, get uncomfortable, and give energy
• They make a measurable and positive impact on business performance – this is measured through our OKRs (objectives and key results) and the goals we set each week. 

Our talent evaluation process strives for inclusivity, transparency, and consistency. It allows you to fairly and strategically consider and compare candidates to find the best fit for the role. Whether you use the same criteria as us or not, it’s worth creating a clear system for analysing talent.

4. Create employee development plans

After finding the best candidates, your next job is to prepare them for the role. Run a skills gap analysis to understand their current abilities. Make an action plan that outlines the leadership development, training, mentoring, and coaching you’ll provide to enable them to work best in their future role.

A candidate’s training and development plan should include not just practical and technical development opportunities, but also the chance to shadow the current post-holder and gain useful knowledge. Review the training needs regularly to make sure they’re still relevant, and introduce a continuous performance management system to support continual growth and development.

5. Set a realistic timeline

Learning and growing into a potential new role takes time, and your succession plan should allow for this. When setting a timeline for succession, make sure it’s realistic and achievable.

It’s not possible for someone to move from a finance assistant into a head of finance role instantly. To get there, set milestones along the way that allow them to become ready and prepared. This is why succession planning should start early, to allow your would-be successors to gain the skills and knowledge they need without feeling rushed.

6. Share your succession plan

It’s hard to imagine your most talented people leaving the business, and it can feel awkward to share your plans for their departure with potential successors and other stakeholders. Despite this, being open and transparent with your succession plan is integral to its success.

It shouldn’t be a surprise to someone that you’re planning for them to move into the leadership team one day. Work together with your candidates to discuss their career goals, explain your plans, and put together a transparent succession plan that aligns with everyone’s needs.

7. Monitor progress

Once you’ve completed your succession plan, it moves into a continuous monitoring and improvement stage. This allows you to make sure everything is running smoothly and identify any roadblocks before they become an issue.

Check in regularly, and use a performance management template to monitor progress. Review your development activities to make sure they’re still useful. Use any new information you gather to improve and update your key competencies, timelines, and contingency plans. Continue to plan, so you can be prepared when the moment arrives.

Download your succession planning template

While you need to follow the succession planning process to get the right results, you don’t need to start from scratch with your own spreadsheet or blank document. We’ve put together a free succession planning template that has everything you need to record your progress.

Inside our template you’ll find a clear and easy-to-use spreadsheet where you can record critical roles, role holders, potential successors, key competencies, timelines, and contingency plans.

Our best practices for effective succession planning

Whether this is your first encounter with succession planning or you simply want to update your process, it’s always worth learning from small businesses that have already been through it.

The succession planning process at Charlie has been developed over time, in response to what works well for a small business like ours. Here’s what we’ve learned and what has worked for us at Charlie:

• Introduce a career progression system — a career progression system allows employees to picture their next steps
• Plan as early as possible — start working on your successors’ training and development now, so they’re fully prepared for the future
• Always consider internal candidates — look for ways to develop existing talent instead of completing an extensive external recruitment process
• Host regular employee performance reviews — our twice-yearly performance reviews allow us to regularly monitor progress in our current role
• Train managers — help managers identify signals that someone is considering leaving, to support employee retention and professional development
• Communicate transparently — be clear and open about your succession planning process and career development pathways
• Listen to feedback — invite employees to respond to surveys and feedback requests, and take action to improve the way you work
• Update your plan regularly — host regular plan reviews so you can identify challenges and work proactively
• Be prepared to be flexible — understand that plans might change and develop contingency plans that allow you to keep operations running smoothly.

People development is crucial within a small business, and the ability to be flexible and customise plans to suit individuals is one of your strengths. Use this to your advantage not just when you want to develop existing employees, but as you look to attract new talent too.

Plan your way to smoother leadership transitions

It’s hard to predict when an employee wants to leave, and it’s even harder to manage that process without a clear plan in place. Use this guide to create a succession plan that allows you to identify talent within your company, train them for their future roles, and navigate leadership changes with confidence.

Regular performance reviews can support your succession planning process. If you’re looking for a better way to run 360-degree reviews, gather feedback, and set realistic goals, our performance management feature has everything you need. Take a free trial now to explore how Charlie can help support your small business.

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