FNB: Why succession planning is pivotal for small businesses

Succession planning is a critical aspect of business management that many small, medium, and micro enterprises (SMMEs) often overlook. The failure to have a clear succession plan in place can have detrimental effects on the continuity and sustainability of a business, especially in times of unexpected events such as illness or death of the owner. Palesa Mabasa, Commercial Segment Head for Gauteng South West at FNB, shed light on the importance of succession planning in a recent interview with CNBC Africa. Mabasa highlighted the challenges faced by SMMEs, particularly during the COVID-19 pandemic, where some business owners have been incapacitated for extended periods due to illness or unfortunate demise. In such cases, the lack of a succession plan can leave the business in limbo, jeopardizing the livelihoods of employees and the legacy of the business. One key point emphasized by Mabasa is the need for entrepreneurs to separate their personal and business affairs to ensure a smooth transition in the event of unforeseen circumstances. This involves documenting contacts, procedures, and business operations to facilitate continuity and efficiency. Mabasa stressed the importance of seeking expert advice from financial planners and lawyers to ensure that legalities are correctly addressed in the succession planning process. Financial constraints can pose a challenge for SMMEs looking to implement succession plans. Mabasa acknowledged the costs associated with hiring professionals but emphasized that proper planning is essential for long-term business sustainability. FNB has taken steps to assist SMMEs through COVID relief loans and access to bankers and financial planners who can provide guidance on succession planning. The introduction of a successor to key stakeholders such as banks, accountants, and business partners is crucial in ensuring a seamless transition and maintaining access to capital. Mabasa explained that the structure of the business and the presence of personal security influence the availability of further capital for SMMEs. In cases where the business owner passes away without adequate insurance or backup plans, banks may need to reevaluate the business's financial viability and cash flow management. In conclusion, Mabasa's insights underscore the significance of succession planning for SMMEs. By proactively preparing for leadership transitions and unforeseen events, businesses can safeguard their operations, protect employees' livelihoods, and secure access to financial resources. FNB's commitment to supporting SMMEs in this critical aspect reflects the bank's dedication to fostering sustainable business practices and facilitating long-term success in the entrepreneurial landscape.