Basic Tips for Family Business Succession Planning
The ability of a family business to successfully transition to the next generation depends on a carefully designed succession plan.
A well-thought out plan to transition the family business alleviates family conflict, damage to the business and its employees and secures a legacy for future generations.
The primary decision in any succession plan is for the existing owner to evaluate who else is capable of running the business and this analysis may have to include consideration of non -family members. It also may require consideration of looking for individuals beyond the family and current employees the business grows.
While The decision of identifying who is capable of being the existing owners successor, this one issue can trigger all sorts of issues and competing emotions and agendas within the owners family.
That is why this decision and issue needs to be dealt with well in advance of the existing owners exit and should really always be in consideration to address an sudden death or other circumstance leading to a quick exit of the existing powner.
It is also important to create a “timeline”as to when certain events and transitions of duties and management will occur and address any changes in job descriptions, titles, compensation and related issues. A plan is only as good as the actual implementation of the plan. A plan that never actually happens is only an idea and not a plan.
In any succession plan there will undoubtedly be the need for training and decisions to be articulated as to how transitions in duties will occur. These issues can also be challenging and trigger side issues of emotions and friction between family members. As a result,these matters also require a generous allocation of time to occur in order that all issues are ultimately worked out and transitioned properly.
In some instances, the planning process referenced above identifies issues that cannot be reasonably resolved and may lead to a sale of the company by the existing owner at his/her retirement to a thyroid party. In these situations a decision is sometimes necessary to liquidate the value of the business and save the family relationships. Again, these are all issues that take time and careful consideration.
As a result, a family business owner not only needs to deal with the present operation of the business but also must look toward the future.
