Looking at recent US figures, nearly 90 per cent of companies are family owned yet only 30 per cent of family-run companies extend into the second generation. Only 15 per cent survive to the third generation.

The reason is put down solely as a lack of succession planning. Similar findings emerge from the UK with a 2005 survey from the Association of Chartered Certified Accountants (ACCA) finding 30 per cent of small business closures due to poor or non –existent succession planning.

The main reason succession planning does not occur is purely psychological. Most, if not all, business owners fear their mortality and believe that the product of all their hard work cannot be run without them. So they constantly put it off as something that doesn't need immediate thought.

Experts believe the best time to conduct succession planning in a small business is when the business owner is between the ages of 55 and 65. That way there is sufficient time to groom candidates over a three to five year period.

Yet, many of the seeds of good succession plans must be sown a lot earlier if the best outcome is to be achieved.

Select the key posts that require succession planning. Typically these are limited to the top managerial roles – however highly skilled technical roles should be considered as well.

Identify future leaders from within the organisation early. Plan a steady development plan for them to move from their current role to the key post at the right time – whether that is in the short, medium or long term.

Balance the lifestyle aspirations of the individual with the organisation's needs. In the 1990s it was all about the organisation. Since 2000 and the growing shortage of skilled professionals, the need to achieve a work life balance has meant that individual needs must be catered for in order to secure the best candidate.

Consider the environment. The business culture must support the easy exchange of information and expertise. Without it any future management candidate will not have the broad skills necessary to lead the organisation.

Motivate through lateral moves. In flatter and smaller organisations, the opportunity to progress upward will be limited which can have motivational issues for leadership aspirants expecting to be fast tracked. Lateral moves should be encouraged to widen skills and offer the candidate a broader experience that will in the long run provide them with necessary expertise.

Pools of talent, not chains of command. In the 90s, succession planning was seen as a linear process with candidates lined up for each role in chronological order. With the amount of structural change inherent in modern businesses, it is highly likely that a managerial position established today will not be there tomorrow. Hence it is wiser to create a pool of likely candidates – each of whom is adaptable to a number of different appointments.

Competence list not list compliance. Competency frameworks have grown in popularity among human resource managers from medium to large sized organisations in the past decade. This has permeated to smaller organisations in their hiring policies. Candidates for roles have to gain a sufficient number of ticks on a competency list in order to secure the role. While this is detailed and auditable, it is limiting. Intangible skills such as innovation and leadership are hard to quantify yet are key for senior appointments.

Business skills. It's all well and good for a candidate to have all the necessary skills but if they can't deliver on a business plan and make a profit then they won't be suitable for senior management.

Diversity. It is a common flaw of many business owners to appoint similar managers to replace them. Or even siblings. However as in Nature, companies need to evolve to improve performance so it is important for any potential candidate to display the innovative thinking and not just be a shadow replacement. This could extend to the option of hiring in outsiders to fill senior roles if a fresh approach is required to stimulate business performance.

Let the system evolve. As change is the only constant in the modern business world, any successful succession planning system must be flexible and adaptable if it is to consistently deliver the best candidates.

All in the family. If the business is a family run operation make sure that individual talents are considered ahead of an ‘equal split' among competing siblings. While handing the business reins to a sibling may feel like the right thing to do, the future successor must have the right leadership and managerial skills to continue and grow the business. Whatever you do, have an individual plan for each family member or chaos will eventuate!

Ultimately there are three key points for succession planning to deliver superior results. Always look for potential leaders in the hiring process – it starts from day one. Every management position needs a succession plan – not just the CEO. Finally, the candidates themselves must be innovative, be able to execute on business plans and be adept at marketing the product or service effectively.

Hopefully these tips will assist small business owners in creating a lasting business legacy that will see their original idea flourish and expand in the decades to come.