Founders: It’s never too early to start planning for your succession

When Ryan Petersen announced he was stepping down as the CEO of Flexport to become a partner at Founders Fund, he probably wasn’t expecting to return to the shipping logistics startup just months later following a succession snafu.

Succession is hard, and even the best laid plans don’t always work, as Flexport found out. It’s completely natural for founder-CEOs like Petersen to want to move on from their companies. Many companies also hit a point where it may make more sense for a founder-CEO to step down and make space for different, or more experienced, leadership.

But in today’s market, it’s harder than it has been in years to do an IPO, which has led to a number of first-time founders finding themselves at the helm of seemingly dormant and sprawling startups, with no end in sight. What’s worse, the past decade of easy capital availability encouraged many startups to grow faster than they should have. It also lulled many founder-CEOs into believing that the good times would last. If things don’t improve, we may start to see more exits next year — not by companies, but rather their founder-CEOs.

Some startups already have succession plans in place, but they are likely in the minority. But succession doesn’t have to be daunting even if you don’t have a plan.

Founders can take a few initial steps to set themselves and the company up for an eventual departure, even if they aren’t sure of the timeline yet. According to Lauren Illovsky, a talent partner at CapitalG, the first thing to do is make sure you are actually ready to leave.

“[Founders] need to take a hard look [at] themselves and ask if they are truly ready to step down when they say they are,” Illovsky said. “Many times, when push comes to shove, they are not.”