5 Mistakes Small and Medium Enterprises Make in Succession Planning

By Laura Elizabeth

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Small and medium enterprises (SMEs) account for a significant portion of the UK economy. This is seen from both employment and value-added to the economy. However, SMEs have a relatively low succession rate as a second-generation rarely proceeds with a family business. Unfortunately, a low percentage of SMEs manage to survive to be passed to the next generation. 

This article discusses five main mistakes that SMEs make in succession planning. The key mistakes include excessive centralisation of power and delay in succession planning. Highlighting these mistakes arms business owners with the knowledge to combat them and ensure survival of your business in the future. 

  1. Excessive centralisation

Successful succession planning involves the right type of leadership. This means that the SME should be decentralised and involve different centres of power in the management team. However, in practice, there is often the problem of centralisation of power by the business owner and founder who can ignore the strategic changes in the industry. 

Furthermore, excessive centralisation means that your children/successors may not have leadership and strategic management skills that are necessary for effective succession. Proper leadership means delegation of power and responsibilities to the team. 

Moreover, effective succession planning should involve preparation of the future management and owners to proceed with the business. Therefore, centralisation of power and aggressive leadership undermines effective succession planning, and this is one of the most common mistakes that business owners make. 

  1. Delay in succession planning

Another common mistake in succession planning relates to delaying the decision on when to retire. The delay until it is too late leads to significant problems with succession planning. Talent Insight Group noted that, ‘CEO turnover dropped by 20% and hit a record low in the second quarter of the year.’ Although this was in response to the instability that the pandemic caused, it could still have created problems in their succession plan or lack of a plan. (link from the blog: https://www.talentinsightgroup.co.uk/insights/succession-planning)

There is a lot of pressure on the business when the owner is about to retire or in bad health conditions. This can lead to a succession failure when the business owner fails to successfully manage the transformation with his/her business. A possible solution would be to develop a succession plan for your business and adjust it along the way. 

It is important to start early rather than late. This will increase the chance for success in succession planning. In addition, it is important that succession planning is all about planning. Hence, the lack of planning or delay will adversely impact the SME in the future. Therefore, it is reasonable to be careful when planning for business transformation and succession. 

  1. Lack of strategic planning

One of the most common mistakes in succession planning is the neglect of strategic planning and exclusion of children from planning. The SMEs operate in a highly competitive business environment. Thus, the lack of strategic planning will eventually lead to failure. 

Succession planning involves a significant change in leadership, so a lack of strategic planning can undermine the succession. Furthermore, your children or future management members must actively participate in the strategic management of the business. It is important to share your succession plan with them to avoid strategic chaos at the enterprise. 

As a business owner, you need to remember that your children or who will be leading the firm in the future, have a bigger stake in the business and play a more crucial role in the future of your enterprise. This means that effective succession planning involves a commitment to strategic management from the people who will be responsible for the future of your business. The lack of strategic planning can be fatal for your SME transformation. 

  1. Neglect of non-family members or favouritism

It is important to avoid neglect of non-family members when transforming your business and making the decision to retire. Not many businesses succeed in succession planning without the help of people outside of your family. There are many professionals who can help in succession planning with their knowledge and experience. 

Succession planning is a complicated process since your business transforms and you as an owner are not responsible for its future management. Therefore, it is important to find a team of professionals who will play a significant role in the future of your business. Neglect of non-family members can undermine the succession planning of your business because children are not always interested in and committed to the success of your venture. 

In addition, it is not reasonable to play favourites. Not all your children are equally interested in the business, but each can contribute to the succession of the venture. This means that each child should be fairly compensated depending on his/her contribution. Furthermore, merit-based compensation should be a basis for your succession planning. Otherwise, the conflict inside the team will negatively impact the future of your enterprise. Therefore, talent planning is highly important for your business. 

  1. The lack of long-term vision

Another common mistake of the firms engaged in succession planning is the lack of long-term vision. It is important to ensure that you have the vision of what your business should look like in the future before deciding to retire. This is the backbone of your business and succession planning should be based on your vision of the company. 

That is, a business owner needs to identify all the key assets and capabilities of the SME to develop a strategy for succession. The long-term vision will provide a roadmap to your successors on how to manage a business and adjust the strategy to external conditions. 

In addition, you need to develop KPIs to measure performance and the quality of succession planning. Therefore, the lack of long-term vision can be catastrophic for the transformation of your business. The successors will not have the vision on which to rely during the succession process, and this can result in a strategic failure. 


Succession planning is a complex process that involves transformation of your business. To effectively, you need a prepared team of professional managers, effective talent management and dedicated successors who will commit to the future of your business. Major succession planning mistakes include poor leadership at the company, delay in transformation, lack of strategic planning, poor talent management and favouritism at the firm as well as the lack of the long-term vision of your business. 

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