Andrew Farrow Discusses the Impact of COVID-19 on Small to Medium Enterprises and Succession Planning
For small to medium enterprises (SME), succession planning is vital. In addition to planning for tax repercussions and other financial impacts, proper succession planning will ensure a business owner receives a fair price for their company or that a successor is able to take over efficiently and effectively. Therefore, a lack of planning can gravely impact the sustainability of the business. As well, business closures and loss of revenue from ineffective planning can negatively impact the local economy. Regardless of these repercussions, many businesses fail to plan ahead, even in the best economic times. As a result of COVID-19, the economic landscape has changed dramatically. But, how has this pandemic affected succession planning for SMEs?
With a wealth of knowledge in business management, Andrew Farrow of Kitchener, Ontario, recognizes the importance of succession planning. He shares his business experience and insight into the impact of COVID on succession planning.
The Importance of Succession Planning
COVID-19 has made apparent the importance of succession planning. A strong succession plan, especially in a time of economic uncertainty, is essential to the sustainability of a business.
While in some cases succession planning has been put on the back burner while business owners work to keep their companies afloat, for others it has brought about a sense of urgency in developing a comprehensive plan. With high infection rates and the threat of mortality, COVID-19 has forced many leaders to think about a scenario in which they are no longer able to control their business.
Andrew Farrow suggests that the pandemic has also highlighted the importance of including emergency and disaster response protocols in a succession plan. For example, the uncertainty caused by COVID-19 has demonstrated the need for a plan that includes a decision-making chain. If a key decision-maker falls ill or cannot make decisions, who will take on this role?
Pressure to Develop a Plan
For some, COVID-19 has brought about disastrous impacts. In these cases, small to medium enterprises may be forced to develop a succession plan in haste. However, succession planning requires time, and the implementation can take years. Therefore, a rushed plan and the implementation of this plan can have negative effects on a business. For example, if the business owner intends to sell the company, the uncertainty in the market caused by COVID-19 may have a significant impact on the valuation of their business. Andrew Farrow warns that rushing a successor into a leadership role can have negative consequences. For instance, the successor may not have time to complete proper training or to develop strong relationships with employees and customers.
Access to Advice
As Andrew Farrow acknowledges, facilitation is often necessary to develop an effective succession plan. Unfortunately, as a result of COVID-19, many businesses are not in the position to hire the necessary help they need to develop this plan. This can result in a plan that isn’t as effective as possible, or it may mean that no succession plan is developed at all.
Andrew Farrow on a Shift in Focus
COVID-19 has put a lot of pressure on business owners. Even in a strong economy, says Andrew Farrow, it can be difficult for leaders to step back and focus on their business goals. In times like these, this is made even more difficult. Rather than concentrating on developing a succession plan, business owners may be required to focus on keeping the business afloat. As a result, attention has shifted from planning to surviving, with many small to medium businesses closing or barely hanging on amid the COVID-19 pandemic.