Family Business Succession Planning - Tips for Success
Updated: Oct 27, 2020
Family Business Succession Planning
Do you own a family business and know that you need to start building a succession plan for your business? If so, the following Tips for Success are provided to help you get the succession planning process started so that you don't fail to plan for the transition of your family business.
Tip #1. Communicate, Communicate, Communicate
Talking with family members and other stakeholders about family business succession is the biggest factor contributing to the success of your succession plan, Conversely, not talking openly about the succession plan is the often responsible for preventing a business from transitioning from one owner to the next.
Tip #2. Start Today
It is never too early to start planning for your eventual exit or retirement from your business. I always suggest having your succession plan built and in play five years before you plan to actually walk out the door. A five year runway allows ample time to tax and estate plan and groom the nest owner.
Tip #3. Be Objective
You need to have realistic and objective expectations about your succession plan from the outset. If your business was only barely profitable, to can't expect your successor to pay top dollar for it and put their future and the future of the business in jeopardy just to fund your retirement. Succession plans have to create win/win situations for the buyer and the seller.
Tip #4. Consider Outside Leadership
Sometimes, your family members are just not equipped to be hands-on business owners and managers. This isn't someones fault, it's just the way life turns out sometimes. So you have to be careful not to try and make a family member fit into the business when there is little chance for a good fit. In cases like this, you are better off to look outside the business and turn over at least the day to day leadership and management of your business to someone that is well-suited and well qualified to lead the company.
Tip #5 Be Decisive
When it comes to family business succession planning, there is no room for gray areas or unclear goals. The end goal must be clearly determined, defined and agreed on before time and money is spent building the succession plan. From the start, you need to get everyone moving in the same direction toward achieving the same goal. This isn't always easy so you have to make a concerted effort to make a decision and stick with it. Changing the plan or being unsure about the end goal only leads to confusion and hurt feelings.