Who’s next in line to lead your family business?
As reluctant as many families may be to tackle the issue, the strength and longevity of a family business depend on careful succession planning and on communicating the results of that planning to the right stakeholders at the right time.
The importance of careful succession planning is often overlooked – indeed, only about 30% of family businesses survive into a second generation.
The key challenges faced by a family business include the ability to get unified management out of a family group. Some members may be insufficiently concerned with the business or simply lack the capabilities to successfully run it. Often disputes about how the business should be operated and managed can lead to damaging arguments amongst family members, which may result in the breakdown of the business.
If you are a business owner hoping to pass your company on to the next generation, a few key considerations can help you successfully navigate the transition while maintaining family harmony.
- Start succession planning early – the earlier you can start planning for the transition, the better.
- Ensure your children are interested in running the business and if they are, give them an education that would make them credible in running the business.
- If there are multiple successors, clearly outline the domains and what each would run and be responsible for – this gives them all the opportunity to work together without getting into each other’s ways.
- Stick around for a while – the wisdom and experiences accumulated over the years are invaluable to the next generation.
- Allow the new owners to run the show – the senior generation needs to let the next generation make some mistakes, learn from them and do things differently.
- Bring in experts skilled in helping family businesses work through complex issues such as structuring the transfer, timing of the transfer, tax considerations, retirement income needs of the first generation and many more.