Family Business Succession Planning
For a family business to succeed in the long term, it is crucial to facilitate straightforward transitions from one generation to the next. Family businesses account for a significant share of the modern economy, provide millions of jobs and generate considerable revenue, but long-term success is dependent on the ability to adapt to new challenges and foster innovation. Similarly, a family business’ strength lies in a healthy balance between the needs of the business as a whole and the needs of its individual members.
In looking to the future, succession planning can be a difficult topic to broach. However, family business succession planning experts — such as attorney-at-law Edgar Paltzer — advise families that putting plans in place as early as possible serves to protect the business and enables its members to control events as they occur.
The Difficulties in Approaching Succession
A lack of harmony between generations can have a disastrous effect, potentially leading to the failure of a family business. When the generation in charge struggles to pass control to the following generation, this can foster resentment and leave younger members of the family feeling inadequate.
The embedded PDF examines how to identify the right time to step down.
Similarly, the older generation may expect their younger counterparts to run the business in exactly the same manner as they themselves have. They may not wish to deviate from processes that have remained in place for years or even decades, resulting in the younger generation struggling to assume authority. It is important for current business leaders and managers to acknowledge that fresh, innovative ideas can drive their business forward while protecting their family’s legacy.
The Most Effective Succession Planning
Honesty and clarity are crucial in succession planning. Recognizing that a successful business may outlive those in charge, each family member involved in the business must be clear in what they want. Whether they wish to remain at the helm in five or twenty years, these desires must be communicated to the next generation. It is also essential to evaluate the management structure of the business and make appropriate changes should it be deemed necessary.
Furthermore, in-depth conversations between family members on the subject of the business’ values allow all involved to know where the business is heading, as well as creating a clear timeline for the assumption of responsibilities. It is equally important to set this out in a written format.
For a family business to flourish, it is clear that involvement in the business from a young age makes a significant difference. Including younger family members in discussions on growth, competition and the everyday processes of the business equips the next generation with the tools to take over in the future.
