The biggest life event in your family business
Family Business: With statistics showing that only 30% of family businesses survive into the second generation, with a greatly decreased percentage making it into each generation after that – how you handle the succession of your hard won legacy is one of the greatest “make or break” moments in the family business life. As with any important event, it’s more likely to go off without a hitch the more planning is put into it.
As with any important event, it’s more likely to go off without a hitch the more planning is put into it.
Talk about succession planning
Communication is the starting point to a successful succession. And we don’t mean after you’ve made the decision to retire –
this conversation is an ongoing one that should include all the relevant parties as early as possible.
It’s only through keeping the topic open that an owner will know that they are on the same page with their chosen successors. If you assume that your children will take over the helm, but have never brought up the subject with them then you could have a nasty surprise when it comes time to retire. They could want to follow a different career path and then you will be left scrambling for a suitable successor at the nth hour or forced to sell the company.
The more often the topic is brought up, the more likely that every little detail will be nicely ironed out long before the actual succession needs to take place – making the hand over so smooth that clients and the public don’t notice any shift in management, quality or delivery.
Bring in outside expertise
When personal relationships are mixed in with professional responsibilities, certain subjects – like who will take over ownership from the current generation – can become too emotional when only family members are involved in the conversations.
Avoid allowing the subject to become too sensitive and possibly taboo, leading to it never being discussed, by bringing in an experienced outside influence. When the conversation is directed in the right way, and is treated as separate from personal feelings, then it will become an incredibly healthy conversation for the future of the company, as well as the family’s involvement in it. An outsider can bring in an objective perspective that allows them to advise the current generation, as well as develop a mentoring programme for the next generation for the company to follow.
Make sure all parties are happy
When a succession is on the cards for years, then it gives each generation time to get on track for the event. Successors are given the confidence that they are being nurtured with the skills they will need, and not being dumped unexpectedly in a role they may not feel ready for. The current owners are also afforded the time to ensure that they pursue a succession transfer option that best suits them, their retirement and the company going forward.
It also gives time for the company to be evaluated over a few years, so that both the current owners and the new generation understand the value of the company at the hand over, as well as the cycles of the company, and how to hand each period in that cycle.
Get it in writing
Much like how a marriage needs an written agreement by both parties to enter it on the right terms, a succession is just as big a step for a company, and so needs to be afforded the same reverence.
Make sure every point of the succession plan is plotted down in writing – including any clauses that affect other members of the family in the hand over, as well as the successors and the leaving owners. This is the best way to make sure that there are no misunderstandings and that everyone can agree to each and every point before signing their name to the agreement.
As long as succession is worked towards as a natural progression in a business, and not treated as an uncomfortable event that the owner doesn’t want to face with the next generation, then it will have the best chance of success. At the end of the day, owners should view themselves as the custodians of a business that is a separate entity to them – and succession is merely ensuring that the next custodian can look after their charge to the best of their ability.
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