According to the Small Business Administration in the USA, only a third of family-run businesses make it to the second generation. Although less comprehensive research is carried out in this part of the world, there is no evidence to suggest the number is materially different. So what are the strategies to ensuring your business is one of those that survive? The key is succession planning.
Succession planning can limit dissemination and downfall, and can be a simple step-by-step process that will ensure future success. It requires a long term approach: investing in mentorship and leadership can reap benefits as many as 20 years down the line.
Start by taking time to consider your ultimate goals (but be aware that goals, and therefore plans, will fluctuate). Build flexibility and evaluation periods into your plan. To assume there will be a natural successor or that your most desired candidate will want the position is a common mistake, especially in family-run businesses.
Factor a wide range of possibilities into your plan. In order for a next of kin to seamlessly take over and generate a flourishing legacy, they must have the willingness, desire, training and know-how required for any entrepreneurial position.
Set milestones in your plan that include evaluation times and periods of consideration. You need to account for changing situations - have one or more of your children now enrolled at university, entered a master’s program or taken a job at a competitor’s business?
If your planning leads you to selection of one family member over another, try not to let feelings, favouritism and emotional attachments play a part. Remain as impassive as possible yet respect family bonds. Try to stay true to your original succession ideal, and make the decision based on who has demonstrated their ability to maintain your desired legacy.
Keep family members and important players in the know, sharing your thoughts and ideas along the way. Minimise the element of surprise or you may create hurt and dissatisfaction. When a decision has been made, be prompt and clear and do not hesitate to put the orders in motion. Do not leave things in a period of limbo and uncertainty.
A sound suggestion is to set up a board of trusted team members or colleagues to be your counsel. This keeps you informed and also allows your colleagues and team members to feel that they have a part in the decision making process.
And don’t write yourself out of the plan. Keep yourself in mind as your make decisions and craft out how you will remain part of your legacy after the changeover.
Remember to give thought and equal consideration to all options, even if the years eliminate some of them. You never know what financial environment you might find yourself retiring in, and in some cases the selling of the business may prove the most profitable and stable way to take care of your loved ones.
As experienced professionals we have the expertise to assist with succession planning. With our assistance, you can increase the chance that all parties will achieve their desired outcomes.