Succession planning is important in any business, but it is sometimes overlooked in family-owned operations. This is a big mistake. There are many family-run companies that no longer exist because of a poor succession plan or none at all.
Begin the Conversation
The plan needs to be well thought out and discussed with everyone affected. Do not just assume that a son or daughter will want to carry on the family business. Even if your children say they will take over, they may not have the true desire required to continue a successful operation. A family meeting in a neutral setting away from interruptions can help focus discussion, perhaps with the assistance of a professional consultant to guide the agenda.
Include Key Players
Consideration should be given to business and personal goals, as well as the plans of the next generation. Who has the most aptitude for leadership? Who wants to stay with the business?
The “heir to the throne“ also may not have the business skills to succeed after a parent (or aunt, uncle, etc.) turns over the reins.
In the case of multiple potential successors (for example, more than one child), plans need to be made for which responsibilities each person will have upon succession? It is important that the details be worked out early, because, in the case of an unexpected death or disability, succession might occur sooner than planned.
Beyond the discussion of the roles of younger family members, you will also need to outline the times for major transitions, barring unexpected illnesses or death.
Plan the Transition
In addition, you want to make sure that the future leaders of the business have the proper training. There are several different options. One is having younger family members work in several different areas of the business. Another is having aspiring family business leaders get some experience in another, non-family business to learn alternative ways of doing things.
The importance of preparing for succession can’t be overemphasized. Neither can the importance of transitioning the business in an orderly fashion.
Sometimes, as planned retirement nears, elder family members do not want to let go. This can cause resentment on both sides. Naturally, the elder family members want to see the business they built (or took over, if already a second-generation business), continue to succeed as it did under their leadership. They can be concerned that the company won’t flourish without their direction.
At the same time, the younger family members may think they can bring the business to even greater success if the older relatives would just step aside. This is where a scheduled, gradual transition of management and leadership responsibilities from one generation to the next can help.
Take the Right Next Step
Don’t leave the future of your family business up to chance. Schedule a session to meet with one of our advisors. Our team of experts will help you take the right next step for your business.
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