Family business succession planning: Start preparing for the future with a few quick tips to consider
Article by Katrina Brennan
I often hear business owners say “How would this business survive without me?”
It’s a great question to ask – especially for small business owners. Succession planning is vital for all business owners, but particularly family business owners.
It’s useful to start thinking about this sooner rather than later. Before we get into some quick tips for succession planning in your family business, a little more about why it’s so important…
What if you decide to sell, retire, or the unexpected happens?
At some stage in the future, you may decide to leave your business by either selling or retiring.
An unexpected event such as death or illness could also force your hand. Having a succession (or exit) plan in place could help you transition out of your business and maximise the value of it.
But preparing a business for a new owner takes considerable time and effort. And there are several options to consider. Too many businesses just look at the selling option.
By taking a more strategic approach, you’re more likely to get a favourable outcome.
Also, by succession planning, you make it clear who will take over the family business and reduce the potential for unwanted disputes between family members.
Quick tips for family business succession planning
Here are a few quick tips to consider when starting your succession planning:
- Commence succession planning early in the life of the business. As your business grows, keep in mind the question of how it can run without you.
- Always keep your financial data up to date so that information is easily accessed and ready for any new plan.
- Understand the overall strategic plan of the business – this should be reviewed regularly and updated.
- Determine the key roles needed for the future and who will ‘fit’ with your business going forward.
- Assess the talent needed to grow in order to meet your business strategy.
- Select a successor as early as possible in the succession planning process and then appropriately train, develop and introduce them to other key business people.
- Determine the importance of family involvement in the leadership and ownership of the business.
- Set retirement dates for owners/founders and ensure that everyone is aware of and working towards these dates.
- In addition to the successor, organise a backup of talented people who can evolve through training and involvement in the business.
- Communicate your succession plan (and any updates that arise) to family/stakeholders.
- Consider all of the financial and tax implications of your succession plan.
For any family business owner, the thought of leaving the business will stir powerful emotions. That could interfere with decision-making and communication.
By creating a succession plan or simply starting the conversation, you will give your family members, clients, employees, and other stakeholders the comfort that you’re planning for the future and that the business will continue even if the unexpected happens.
Contact us here if you need assistance with creating a succession plan for your family business.