By Brigitta Warren · Updated September 2026
Why SMEs avoid it, and why they should not
Most owner-led businesses do not have a succession plan because it feels like planning for bad news: the Operations Manager leaving, the founder retiring, the one engineer who understands the plant walking out. So it gets deferred, and then one of those things happens on a Tuesday.
We see the result regularly. A business calls us because a critical person has resigned, nobody inside can cover, and the search has to start from zero under pressure. That is the most expensive way to fill a role: the vacancy is long, the owner absorbs the gap, and rushed decisions get made. Our guide to the cost of employee turnover shows what that adds up to.
A succession plan does not stop people leaving. It changes what happens next: an interim option inside the business, a shorter vacancy, a calmer search, and a leadership team that has been developing for the moment rather than reacting to it.
Step 1: Identify the critical roles
Not every role needs a succession plan. Focus on the ones where a vacancy would materially damage the business. Ask, for each senior or specialist role:
- If this person left with four weeks' notice, what would stop working?
- How long would it realistically take to replace them from the market?
- How much knowledge sits only in their head?
- Do customers, suppliers, banks or regulators deal with them personally?
In a typical Waikato manufacturing or engineering SME the list comes out as something like: the owner or GM, the Operations or Production Manager, the Maintenance or Engineering Manager, the Financial Controller, the senior sales or key account person, and sometimes one technical specialist whose knowledge is irreplaceable. Four to six roles. That is your plan.
Step 2: Assess readiness honestly
For each critical role, name the people inside the business who could step in, and be honest about how ready they are. A simple three-level scale works:
| Level | Meaning | Implication |
|---|---|---|
| Ready now | Could take the role tomorrow and perform at least adequately | Keep them engaged; they are also a flight risk if they cannot see the step coming |
| Ready in 1 to 2 years | Has the core capability; needs specific development and exposure | Build a development plan and start it now |
| Emergency cover only | Could hold the role for a few months, not permanently | Useful as interim; plan an external search alongside |
| Nobody | No credible internal option | Decide whether to develop someone from further back or accept the role will be filled externally, and plan for that |
The honesty is the hard part. Owners tend to over-rate loyal long-servers and under-rate quieter people. If in doubt, ask a straight question: would you promote this person into the role today if it fell vacant? If the answer is a hesitation, they are not ready now.
Step 3: Develop the successors
Development for succession is not a course. It is exposure to the actual work of the bigger role, with support. The methods that work in SMEs:
- Acting up. The successor covers the role fully when the incumbent is on leave, with real authority, not "just keep things ticking over". Debrief afterwards.
- Delegated ownership. The incumbent hands over a slice of the role permanently: the budget, the customer relationship, the audit, the recruitment.
- Exposure upward. The successor attends leadership meetings, sees the numbers, understands how decisions are made.
- Targeted external training. A leadership programme, a financial literacy course, a technical qualification, chosen for the specific gap.
- Mentoring. Regular, structured time with the incumbent or another senior person, focused on judgement rather than tasks.
Write a one-page development plan per successor with two or three specific gaps, the actions to close them and a review date. Tell the person what the plan is for. Ambiguity ("we see you as someone with potential") frustrates good people; a clear path retains them. This is one of the most effective retention strategies an SME has.
Step 4: Capture the knowledge
Whatever else happens, the knowledge in critical people's heads needs to come out. Practical ways to do it without a documentation project:
- A one-page "if I got hit by a bus" note per critical role: key contacts, passwords held elsewhere, the three things that go wrong and how to fix them, the decisions that are pending.
- Shared relationships: the successor is introduced to key customers, suppliers and advisers and deals with them directly on some matters.
- Process documentation for the genuinely critical processes, written by the successor while the incumbent is available to correct it. It gets written and the successor learns.
Step 5: Know when to go external
Not every role can be filled from inside, and pretending otherwise is a common way that SMEs lose ground. External search is the right answer when:
- The readiness assessment says "nobody", and the role is too critical to wait two years for someone to develop.
- The business is changing in a way that needs skills nobody inside has: a first proper Finance Manager, an Operations Manager who has run a bigger site, a commercial lead for a new market.
- The internal candidate is capable but the business would benefit from an outside view, or from someone who has seen how other businesses do it.
- Promoting the internal person would leave a gap beneath them that is just as hard to fill.
The trap is doing the external search only when the vacancy is already open. A better approach is quiet market mapping in advance: knowing who the strong candidates are in the region for your critical roles, what they earn and whether they might move. That is a core part of how we run executive recruitment, and we can do it confidentially well before there is a vacancy, so that when the moment comes the search starts from a shortlist rather than a blank page.
Owner succession: the biggest one
For many Waikato businesses the critical role with no successor is the owner. Owner succession is a larger topic involving ownership, governance and often a sale, and it needs accountants and lawyers alongside people advice. But the people side is the part most often left too late.
If the plan is for a General Manager to run the business as the owner steps back, that person needs to be in place and performing at least two or three years before the transition, whether developed internally or recruited. If the plan is a sale, a business that depends on the owner for every decision is worth less than one with a capable leadership team. Either way, the succession work for the roles beneath the owner is what makes the owner's own succession possible.
Keeping the plan alive
Review the plan every six months, in a leadership meeting, in under an hour. Has anyone's readiness changed? Has anyone left or signalled they might? Are the development plans actually happening? Has a new role become critical? A plan that is reviewed twice a year stays useful. One that is written once and filed is a document, not a plan.
If you would like help assessing readiness, shaping development plans, or quietly mapping the external market for your critical roles, talk to us. Our recruitment strategy and design service covers exactly this kind of long-term workforce planning.