Succession planning is a challenge for all businesses. However, family owned businesses have an extra layer of complexity to consider. The overlap of familial relationships and sustainability may give rise to inter-family conflict, issues with generational transition and estate and inheritance expectations. It’s not surprising that almost 70% of family owned businesses don’t transition to the second generation.¹
Although succession planning should be broken down into considerations around tax, management and ownership, in this Viewpoint, we will focus on management and ownership considerations.
One of the hardest things to do as a founder of a business is to allow someone else to step in and take control. However, this is a vital aspect of knowledge transfer and skills training in family owned financial advice firms. Bob Neill from Seaview Consulting suggests that allowing potential successors to be part of decision making processes over a longer period will allow them to understand and better prepare for their increased responsibilities.²
For founders, this transition period is important as it allows them to develop and nurture the successors’ talent, as well as gaining confidence that their business will be left in the right hands.
For many founders, deciding on which child or family member should be left in charge of a business is one of the hardest decisions to make during the succession process. Whilst this decision is highly emotional, it is important to focus on the best options for the long-term sustainability and the growth of the business. It is also important to manage expectations placed on successor generations and whether they are truly passionate about taking over the family business.
Managing expectations also includes acknowledging that some family members may feel disappointed by their allocated share of the business. Successor generations should manage these expectations early on to avoid leaving behind legal battles and relationship breakdowns.
Establishing a solid plan
Forbes suggests that there are five vital steps to creating a solid succession plan for family businesses.³ These include –
- Establish goals and objectives
- Establish a decision-making process
- Establish the succession plan
- Create a business and owner estate plan
- Create a transition plan
Deciding on a plan and sticking to it can be hard, but external help can ensure that the right strategies are put into place.
Getting outside help
One of the best investments you can make is to get outside help with the development of your succession plan. Agencies like Seaview Consulting provide an objective and thorough examination of your business to help you decide which areas to focus on, what your weaknesses are and what your business needs to do to implement a sustainable growth strategy.
To have a better idea of how Seaview can help you, you can watch Bob Neill's recent Future Unlimited webinar, The 5 stages of developing a successful succession plan for your financial planning firm, below.
¹ "Tips for Successful Family Business Succession Planning," The Balance
² "Family Business Succession Planning," Seaview consulting
³ "5 Steps to create a viable succession plan for your family business," Forbes