Family Business Succession Planning
Family business succession planning is the process of transitioning the management and the ownership of your business. Handing down the reins of your family enterprise to the next generation is an exciting opportunity. For many, though, it can be unchartered territory. Current owners may feel apprehensive and uncertain of this transition, while others may feel excited and relieved about it. While there’s no clear set-in-stone pathway for a successful transition, there are many ways that families can begin to set themselves and their business up for achieving a long-term legacy.
It all begins with a plan. Family business succession planning is a crucial step in ensuring its longevity. It is a strategic process that helps organizations and multigenerational businesses ensure they are developing the best talent for leadership roles.
Succession planning is not a quick fix, or necessarily an easy process to implement. Executing a prosperous succession plan takes time. It begins with communication and a strong plan and progresses over many years. However, the benefits far outweigh the additional work to set up. Starting early and ensuring proper follow-through are the bones of a thriving succession initiative.
Preparing for the Next Generation
Preparing your business to be passed down to the next successors starts well before any actual action is taken. It begins with conversations between family members, planning, and a lot of communication. It’s important that both seniors and new next generation candidates act in partnership to build a methodical approach that will work to ensure a healthy and well-executed transition. Now is also a good time to reexamine the best corporate structure that will benefit the business long-term.
While it may seem easy enough to pass down a business onto the next descendent, not all family members may have the same visions for themselves in your business as you. In terms of leadership, not every person should, or wants to, be in a leadership position. Discussing and analyzing these things now will save your business from complications down the line and ensure you are creating the proper plans moving forward.
Now is a good time to begin setting reasonable expectations and steps for the upcoming successors. Realizing that not everything will fall into place right away and plans may have to be adjusted as you go is a good starting point for these expectations.
Some important items to consider:
- Start next leaders early and in lower ranks of the company
- Have the next generation actively work their way up, learning all aspects of the business along the way
- Next family leaders may begin attending planning meetings for the company early on to deepen their understanding of the business. Transfer of day-to-day leadership, usually evolves over time prior to ownership transition.
- As the senior family member, keep an open mind. Recognize that the next successors are bringing new ways of thinking with them that can help to advance your business.
By implementing some of the above, such as having the next generation work their way up, you can actively add to their knowledge, skillset, and confidence within the company. Think about what you can do now, as a family, to help give the incoming leaders the foundations, tools, and strategies to be able to run the business independently in a strong capacity down the line.
It will take time for your family business succession planning goals to be reached and for the newer successors to feel completely comfortable in their new role. Even then, it may take time for these new skills to become lasting habits. Again, ensure you account for this lengthy transition in your planning initiatives.
Maintaining a Healthy Business
Many multigenerational family businesses have one important concern when considering succession. How can they ensure they are preparing themselves for healthy, strong, profitable, and sustainable business long after the transition?
The first step — think ahead in your business planning. Don’t operate on the fly and hope things will work out. Take the time to evaluate your company, where it is at now, what challenges may be incoming for the upcoming leaders and the current staffing you have in place. Do a deep audit of all these things.
Do you see any gaps?
Any areas that you feel the incoming leaders are not prepared for?
Areas for opportunity?
Does your current staff support the long-term goals & are they able to work with and help the next generation with the possible challenges?
Take the time to talk to all your current employees and the upcoming successors. See how they feel and what they think may be important issues or obstacles in the coming years. Once you’ve done this you can clearly lay out all opinions and views and look to see if your organizational structure has a strong foundation or if there may be cracks you need to address.
Navigating Transitional Years and Beyond
There is no standard timeline of when a senior predecessor should step back. Based on the individuals involved and the progress made in the years leading up to the transition you will be able to get a sense of proper timing. Generally, this is when all parties feel confident that the business can sustain itself with the new leadership in a successful capacity.
When the time comes to pass down the keys of the business to the incoming family member, don’t take this as an indication it is time to walk away completely. Expect to stick around for a few years during and after this transition period. The next generation will need your advice and counsel while they are navigating this new role for themselves. Remember that you’ve accumulated a lot of knowledge in the industry and business over the years and you are an invaluable resource for the next leader while they are still getting their feet planted firmly in their new role.
Make yourself available to help the next successors. While they may not come to you with burning questions every day, that does not mean they do not require some guidance. Check-in with them, ask them specifically what questions they have and how you can help them. Checking in frequently and reassuring them that you are available will help to ensure that the next generation feels supported and prepared for the long-term.
Consider Getting Professional Help
If you need guidance in succession planning of your family business, consider hiring a team of experts. They can help you with the initial planning and throughout the transition process. For many families, this may be a new process. An experienced professional can help make it a successful one.
Here at Part Time CFO Services we want to ensure your business planning initiatives, such as multigenerational succession planning are analyzed from a 360-degree approach. All factors of your business’ success, whether internal, external or a blend of both are taken into consideration. Our experienced and qualified team members have the expertise and proven frameworks to help your business develop strategies that align with your goals and ensure the long-term profitability of your business. Contact Us