8 Things You Should Know about Family Business Succession Planning

Succession planning can mean the difference between success and failure for a family business.  Sooner or later, everyone wants to retire. But if you own the business, retirement isn’t just a matter of deciding not to go into the office anymore. So how do you transfer the business without the family falling apart? How do you teach each new generation, early on, the difference between ownership and stewardship?

With this in mind, here are my top ten tips for making the succession planning process as smooth as possible:

1. Tell the family what you’re doing. 

Make sure that the appropriate people with a vested interest are aware of the succession plans. Without their input, it’s not a plan!

2. Start now – the sooner the better.

This is the big one. So many families don’t invest in a plan and it can get really messy if you try to rush things. Five years in advance is good. Ten years in advance is better. Many business advisers tell budding entrepreneurs to build an exit strategy right into their business plan.

3. Invest in time to learn.

A successor should aim to suck up the smarts out of the incumbent’s head to add them to their own growing store of information, knowledge, experience and wisdom.  How can you expect your successor to take over and run your business successfully if you haven’t spent any time training him or her? Take the time to sit and take notes, ask the hard questions, and give them time to pass on knowledge.

4. Document your plans. 

If it’s not written down it does not exist. There’s plenty of tools online on how to document all the stuff you’ve probably kept in your head up until now. Get some help if you need it, but whatever you do, jot it down so that others in the family know, and it’s not the cause of a dispute in the future.

5. Make sure you have a up to date and relevant Will.

So often there is no Will or if there is one it is completely out of date. Having your affairs in order can make a world of difference alleviating stress in a time when emotions are stretched. Make this one a priority.

6. Who is the new leader?

Don’t just search for or try to create a clone of the current leader. Let them be their own person. Allow them to be entirely complementary and compatible, different, and a powerful catalyst for business growth. You never know – you might find the business thrives under a new personality.

7. Independent advisors

You may need to get in some new blood, to help you work through some issues or sticky points. Don’t be afraid to do this. It’s not failure; it’s planning.

8. Review your Succession Plan on a regular basis.

Review and amend your Succession Plan as required.  Meet with your professional advisors at least once a year to review your succession plan especially if your business and family affairs are complicated – and you are approaching “retirement age”.  Remember there are no black and white rules for this – each situation is different.

 Author: Ross Anderson, Family Business Consultant