Ways to Ensure Success in Family Business Succession Planning

by | May 27, 2019 | Business Planning

Scrabble tiles spelling out "LIFE," "FAMILY," "BALANCE," "WORK," and "CAREER" are arranged on a wooden surface in a crossword puzzle style, symbolizing the intertwining aspects of life, family business, and work balance.

Family-owned businesses are most likely to fall when transiting from the founder to the second generation. Some of the contributing factors include taxes and family discord. However, the main reason why family-owned businesses fail when transiting is lack of a good succession plan. If you are the owner of a family-owned business and you are looking for ways to ensure a seamless transition, here’s how to achieve this:

Start early

Start five years before the succession. Ten years if you can. In fact, for better success, business advisers instruct prospective entrepreneurs to include an exit strategy when they are making their business plan. The rule of thumb is that the more time you dedicate to succession planning, the more successful the transition will be.

Involve the family in discussions

Making a succession plan on your own and then making it known to the family is one way to erupt family discord. Instead, ensure there is a dialogue among the family members as this will kick-start the succession plan. Through discussion, you will put into consideration personal feelings, goals and the ambitions of the concerned parties.

Realistic plan

You may want a particular individual member to run the business, but the question is, are they up to the task? They might lack the right managerial skills and this might task you to let another family member take the helm. Additionally, there may be no family members who are capable of running the business, and you may have to consider selling the business. For these reasons, consider the strengths of each successor objectively and act to the best interest of the company.

Train your successor(s)

Your successor will not be successful at succeeding you if you’ve never spent any time training them. Your succession plan will stand a chance if you get to work with your successor at least a year or two before you embark on the plan.

Seek outside help in the planning

Many professionals can assist you in the business succession planning process. These include financial advisers, lawyers, and accountants. In fact, some companies deal solely on succession planning and who will conduct the process including ironing out any issues in the process.

If you are to successfully pass your business to the next generation, failing to plan effectively on business succession is the surest way to tank this plan. With a good succession plan, not only will you retire successfully, but your business will rest in the right hands.