Family Business Succession Planning
3 Minute Read
Succession planning is a process that every organization needs to be thinking about and working on throughout the lifecycle of the business. However, succession planning in a family-owned business has some unique challenges and considerations. More often than not, more than one family member is working in, invested in, or associated with the business. When your business associates are the same people you celebrate special occasions and holidays with, you need to be even more intentional about not damaging relationships in the process.
“Family Business Succession Planning: Too many second and third-generation family-owned businesses fail because they haven’t picked the right people to lead the company into the future.”
Here are a few things to consider if you are a family-owned business going through succession planning:
Don’t start with succession planning.
Instead start with a well-articulated vision, strategy, and core values. Do this not only for your company but also define those for your family. Often the company and family vision and values intersect, but they rarely are exactly the same. Develop a set of guiding principles and a future picture or plan for your family. This provides the company and the family a set of bumper rails to stay within so things don’t get too far off track. It also gives everyone a clear understanding of key success factors and milestones for the business and the family to work toward.
Start early, don’t wait!
Conversations around succession planning come with a multitude of emotions entangled in the mix of complex business decisions. Allow time to process, reflect, and communicate to those impacted. Be intentional about maintaining healthy family and business relationships as you navigate through this process. Know going into this process that there is a chance that these conversations may stretch even the strongest relationships.
Define decision-making rights upfront.
Discuss and come to an agreement on who will be involved in which decisions; as well as who makes the final decision on key items. This requires the ability to pull apart roles such as owner, board member, manager, successor, family member, etc. Depending on which hat you’re wearing or role you’re playing, you may have a different level of decision-making authority. Having discussions and coming to an agreement on this prevents the business and family leaders from unintentionally stepping on each other’s toes. Especially in light of the fact that most family-owners wear many different hats. And those hats will change and evolve as the succession process occurs.
Articulate why the business exists.
What legacy does the owner or the family want to leave? Was the business started with the intent to have the next generation take over? Or was the plan simply to achieve a certain lifestyle for yourself or your family? Being honest about this will influence key decisions about what the transition will look like as well as the timing of that transition.
Create a space for non-family members.
Beyond family member dynamics and decision making, most family-owned businesses also have non-family members who have believed in and invested their time and energy into the company. Maybe you have team members who have been there since the beginning. And were instrumental in the growth and success of the company. To prevent losing your good team members who aren’t family, be transparent about the succession planning process. Clearly articulate the plan and what the future holds for those individuals. If they are ambitious, they will likely want to know what their future career path holds and where they fit in.
At Revela, we “get” family-owned businesses because we are one. We have personally experienced important milestones and transitions as well as helped numerous companies through their own succession process. Sometimes an outside perspective is needed to help you navigate these tough but incredibly important decisions. Too many second and third-generation family-owned businesses fail because they haven’t picked the right people to lead the company into the future.
Contact us for more information on our Success Planning Process.
For more in-depth information to create a succession plan, download our Step-by-Step Guide for Succession Planning.