As the old saying goes, when you fail to plan, you plan to fail. Did you know that only three in 10 family-owned businesses have a written, formal succession plan in place? Another statistic tells an equally sobering detail: 12 percent of family-owned businesses do not survive past the second generation of ownership, largely due to poor succession planning.
Starting the Succession Planning Process
It’s a difficult subject, but one you need to tackle to ensure the continuation of your business. Where do you begin? First, you’ll need to make the decision to start the process. Second, you’ll want to sit down with your family and look at your own personal goals and assess your company’s current position in the marketplace. Another important and necessary task is to determine how family members wish be involved in the future of the business. All those impacted should be educated about their options and have input in the direction of the plan.
The answers to the questions above will help you determine if you’ll want to identify and train future leaders from within, consider an outside successor or transition your business to a new owner. If the latter option becomes the most realistic, you’ll want to determine your company’s value through a formal business evaluation. A trusted valuation consultant can perform this function as well as help you sort out details such as how much you retain after taxes and the best timing for a transition.
Family Owned Businesses Issues
The dynamics within a family-owned business are complex, with family members who may be candidates for leadership roles who may not have the knowledge, ability, passion or leadership to make it happen. History and emotions can also cause the wrong decision to be made or cause inactivity, which can doom the business or family relationships. An outside business advisor can objectively assist in the company’s succession discussions and planning.
Once you’ve developed your succession plan, don’t forget to communicate the future course of your company, as well as the timetable, to your employees. They know that a transition will occur at some point in the future, and with no communication, they may assume the worst. You’ll want to establish a transition team to make sure the succession goes as smoothly as possible on the schedule you’ve established.
Don’t be one of the businesses that fails to plan. Make the commitment and plan to succeed at your future personal as well as your business goals. Email Rea & Associates for more information.