Moving On? 6 Tips for a Smooth Family Succession
Everyone would love to retire and take a cruise around the world, sooner or later. However, if you are running a family business, retirement involves more than just not showing up at the office; you also need to ensure you have enough money to spend when you retire on top of deciding the business’ fate. Who will take over the reins and run the business?
Have you been putting off succession planning until that last moment when it is inevitable? Use the tips below to ensure that the succession, after your retirement, goes well smoothly as the company moves from one generation to the next.
Always Start Early
Putting in place succession plans five years in advance is good, but ten years is much better. If you are a budding entrepreneur, it is advisable to incorporate your exit strategy into your business plan. The reason behind doing these things early is that the longer time you spend on your succession planning, the smoother the whole transition will be.
Involve Family Members in Succession Discussions
Creating a succession plan on your own and then announcing it out of the blue, is the surest way of sowing discord among family members. Create an environment where family members can dialogue on the best way to move on after your retirement, fostering an amicable and successful succession plan. The result is a plan that takes into consideration everyone’s goals, ambitions and personal feelings.
Study Your Family Objectively
You might be rooting for your first-born son or daughter to run the business, but are you sure they have the necessary business skills or even an interest running a business? Look out of your close circle, there may be someone else more suited for running your business with the experience and an intricate understanding of business basics like SBA loan basics. You have to look at the strengths of all possible successors objectively, if they cannot run the business consider selling it.
No Equal Share
In theory, giving everyone an equal share is a great idea, but not when it comes to your business. During the process of creating a business succession plan, ownership and management are treated as separate entities. It is fairer to have successors running the business getting a bigger share of the ownership in the business than family members who are not actively involved in the business.
An alternative is to create voting and non-voting shares so only some of your family members who are shareholders can influence the company’s policies. Or, you can transfer ownership and management to your successor, and make financial arrangements in regards to your other children.
On-the-Job Training for the Successor(s)
How can you expect your appointed successor or successors to take over your business and run it successfully if you never took the time to train them? A business succession plan has a much better chance of succeeding only if you are working with the successor for a few years before you finally leave. For smaller businesses, teaching the business skills to another individual is difficult, but the effort will certainly reward big for your business’ success.
Financial advisors, accountants and lawyers are some of the professionals you should involve while drawing up a succession plan. Some firms even specialize in these types of family succession planning and can facilitate the process by working through your business and family succession issues.
Planning how you intend to pass your business to the next family generation is something that you should start early. A good family business succession plan will ensure that you have the funds to enjoy retirement and that the venture you have spent so many years building moves into the hands of the next generation that will take it even further.