Tips for a Successfully Family Business Succession Plan

A Family Business Survey from 2016 found that around three-quarters of family business owners planned to pass ownership onto younger family members once they retired. However, the same survey found that only 57% of family business owners had a succession plan in place. This leaves 43% of business owners without a solid plan for how their business will be run following their retirement.

Studies show that even business owners who do have a succession plan in place sometimes fail to communicate this effectively to the rest of the family. As an attorney-at-law who counts succession planning among his areas of legal expertise, Dr Edgar Paltzer is experienced in assisting family business owners to put together succession plans. Planning ahead is often key to ensuring the transition is successful and minimising any potential conflicts.

Involve the Next Generation

Part of succession planning includes determining whether passing the business on to another family member is the right thing to do. Many business owners want to ensure their legacy by passing ownership to the next generation. However, this may not be the best thing for the business or the family, depending on circumstances.

If the business is to be passed to the next generation, the best thing to do is involve them in all aspects of running the company as the earliest possible stage. This helps to develop trust and knowledge, positioning the potential new owner in the best possible position prior to their taking on their new role.

Work with Professional Advisers

Family dynamics mean that there are very few situations where emotion and familial relationships will not impact the potential for success, whether this is in a positive or negative way. Working with professional advisers helps to minimise the impact of emotion, providing all parties with a platform for communication with emotion removed. Advisers will be able to discuss things objectively in a way that close family members may not, weighing the pros and cons for the business without being influenced by relationships.

Be Ready to Let Go

Even with the right succession plan in place, many business owners find it hard to let go, especially in cases where they have built a successful company from scratch. Being ready to let go when the time comes is essential, and it is sometimes appropriate to hand over the reins to the successor prior to retirement. This way, the founder can be on hand to offer advice, while still providing new leadership with the freedom to make their own decisions.