The reason why family business succession planning is important is simple. If you happen to own one, when you retire, if you haven’t decided who will follow you as chairman or manager, then you will have to sell or even close the business altogether. Therefore, finding a replacement within or outside the family is crucial. Here are a few tips on how to go about this process the right way.
1. Start as Early as Possible
In fact, when it comes to family business succession planning, there is no such thing as too early. Many financial and business advisers will tell you that, if this is your situation, you should try to build a strategy in your overall business plan. The reasons are pretty straightforward and obvious. When the time comes, you will want to make the transition as smooth as possible. Second of all, a lot of things can happen over time. Therefore, it’s best to be prepared. And third of all, spend as much time as you can grooming the next person to take your place as the leader.
2. Make Your Family a Part of the Decision
If you make a decision on your own and then simply announce it to your family, you will create disagreement and possible rifts. If you know that there are several members of your family who are willing and are capable of taking your place as CEO of your company when you retire, don’t make the decision in isolation. Start an open discussion with everyone and let them know what you are looking for. In time, the best person will be chosen organically without causing distress to the others.
3. Be Realistic and Objective
Even though you shouldn’t, you might have a favorite son or daughter or even a beloved nephew or two. However, the fact that he or she was a little darling growing up or that they send you the nicest presents at Christmas shouldn’t matter. Look for the business person in your family. Who amongst them has the education and capabilities to run a business? That’s the person who should follow you as the company leader.
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4. Not Everyone Has to Get a Share
Evidently, this would be very nice in an ideal world. However, that’s not how business works, and you know it. From a strictly managerial and objective point of view, it will be a lot better if the successor you chose has the larger share. The others, who are passive when it comes to running the business, should get smaller shares. Another course of action is to give voting shares only to some members of the family. Always keep in mind that not everyone is qualified or even interested in running the business you worked so hard on. In this case, they shouldn’t get a say in what’s happening to it.
Family business succession planning is both highly important and very difficult to pull through. The reason is that you have to deal with and do business with members of your family, one of the first things every business adviser would counsel you against. Remember never to let your feelings get the best of you in these situations.