Tips to Plan Succession for Your Family Business
If you are looking to make a successful succession plan, you will have to consider a lot of things before that. This blog discusses how you can do it.
Successful succession is one of the significant challenges of family firms. Studies have revealed that more than half of them fail to remain the family business past the second generation, and those who get succeed, there is always a concern if the successor should be a family member or nonfamily personnel. In amid of nepotism, you often choose a family member without realising the fact that it needs skills and experience to run a business.
However, it does not allow of an interpretation that you should completely discard family members as successors to your business. Well, whether you choose a family successor or nonfamily successor, succession planning needs careful deliberation. It is a time-consuming process. Here is how you can plan succession for your family:
What is your own vision?
If you are looking for a successor for your family business, first off, you should ask yourself if you are really ready to transfer the title of your business.
- Do you think now is the time to hand your business to someone capable of carrying it forward?
- How are you about to spend golden years of your life?
- Have you analysed income you will need to live your retirement life?
- Is it enough to live the way you want?
- Are you sure that you will not need to take out loans for unemployed to meet unforeseen expenses?
You should have answers to all these questions. Since it is your family business, you cannot take a sole decision. It is crucial to know about their vision. Are they actually interested in running a family business? For a successful succession, you should have clarity about yours and your family members’ goals.
Designing a succession plan
As long as the successor is from your family, you will not need to value your company. Professional valuation becomes mandatory when you are hiring a non-family successor. It will help estimate the current financial condition and its growth potential.
Succession cannot be planned without the valuation of your business. While choosing a professional appraiser, make sure that they have relevant qualification and experience in valuing the business. Make sure that both the accountant and attorney know their roles in preparing a succession plan.
They know what they are supposed to do so you do not have to bear the repercussion for unorganised legal documents. Once you have done all formalities, the next step is to communicate your employees and stakeholders.
You are retiring from your family business, but they will continue to keep working. They also have some expectations, so you should involve them in succession planning. Encourage your stakeholders and employees to express their ideas.
Share with them a picture of how your business will look like after the completion of succession. This will help them understand what they will be working for and what they are supposed to do during the transition. Their inputs are essential to make it work.
Execute your succession plan
Before you take the final step, make sure that your succession plan aligns with yours and your family members’ vision and goals. If you are choosing from your family member, they must have the skills to run your business efficiently.
You will have to keep your employees and managers in the loop. Make sure that they understand the plan very smartly and are on board with it. If no member from your family is suitable for taking the legacy ahead, you will have a non-family successor.
The person you will choose as a successor will have plenty of experience. Make sure that you have given them sufficient time to be familiar with your business. Then you will need to provide them with onboard training. Ask your managers and other employees to help the new successor take it in their stride.
Whether you are choosing a successor from your family or from outside, you need to ensure that they have complete knowledge about your business and they have a problem-solving attitude. The level of their knowledge must be more than managers and other employees so they can carry your legacy forward.
Successful succession is not as easy as it seems. It is a long process. You have to carefully analyse the current financial position of your company and the skills of the successor. If you choose an incompetent person, you will end up shutting down. Set your goals and make sure that all steps you take align with them.
Whether you are choosing a successor from your family or outside, your ultimate goal is to select the one that is able and potent. However, if you decide on choosing the successor from your family, you should make them familiar with your business at an early age.