Family Business Succession Planning
Family Business Succession Planning – The 6 Steps
One of the most important things you can do as a small or family business owner is succession planning. You haven’t spent years of your life building a successful business only to have it fall over when you want to retire, or are no longer able to run it. Yet succession planning is often overlooked.
Effective succession planning can minimise disruption, protect your ‘brand’ and circumvent the creation of factions. Let’s face it, the last thing you want is your legacy being destroyed by a Game of Thrones style power battle.
A recent study by KPMG and the University of Adelaide found only 43% of business owners were planning to pass their business on to the next generation, while 24% plan to sell or float the company. Anecdotally, around half of leadership transitions fail due to poor planning and management.[i] Since the owner of the business is more often than not key to its success, this can have a material effect on the value of the business.
Plan to Succeed
Whether you are operating a family farm, a corner store, or a family-owned global empire, planning for the future is essential. So let’s have a look at some key steps in making sure your business transitions smoothly from your hands to whatever future you plan.
1 – Regular Formal Communication
Whether it’s a board meeting or a formal family meeting, sitting down regularly with a defined business agenda encourages open discussion and helps ensure there is clear understanding amongst all family members and key staff about where the business is headed.
2 – Plan For The Smooth Exit Of Older Generations
Like all good plans, these plans should include any intended dates of transition. But, it should also ensure those transitioning out of the business are taken care of financially. Bear in mind transition doesn’t have to be sudden. If older members are not ready to step down entirely, consider part-time or consulting roles for them.
3 – Have Full & Frank Discussions
Having open and frank discussions about who is best placed to take over at the helm of the business is critical. This will not always be the oldest, and there will not always be agreement, but unless you reach an agreement, there will be choppy waters ahead.
4 – Seek Professional Advice
It is vital that every family member who has an interest in the business is taken care of in some way, even if they don’t wish to work in the business. Accountants, solicitors, and financial advisors have a wealth of experience in advising on the ownership, profit sharing and estate planning you will need to undertake.
5 – Set Expectations
Don’t expect this all to be nutted out in one meeting, especially if there are a range of differing opinions. Set as many meetings for discussion as you require until everyone is satisfied with the plans you are putting in place.
6 – Keep Your Plan Updated
Ensure your plan is current. Just as things change in business, so they change in families. Periodic revision and updating ensures your plan remains relevant and limits the potential for problems when the time for transition arrives.
Following these steps may seem simple and it can be. The important thing is not to get derailed or disheartened by dissention in the ranks. Try to remain logical and practical, regardless of emotional ties.
If you have a family-owned business and are concerned about how the business will move forward without you, Manly Financial Services has years of experience and expertise in succession and estate planning. Give us a call on (02) 9976 3388, or contact us via the below link.