Succession planning is a very real factor for most business—not just family businesses. A change in leadership, for any business, will inevitably come and those changes, naturally, are best managed when they are well planned.
If you have an Advisory Board or Outside Board of Directors (which you should have but likely don’t), you should be hearing from them on a regular basis about addressing your family business’ succession plan.
Simply put, a succession plan is a formal roadmap to guide the business’ future ownership and leadership.
Questions that, among many, should be addressed are the following:
- What is Dad’s target retirement date?
- How will Dad retire? Will he work part-time?
- Will he come to the office once a day, once a week? What are his plans?
- Are their other siblings working in the business?
- What is each sibling’s role?
- What does the leadership structure look like?
- What does the ownership structure look like?
- Will siblings outside of the business inherit ownership?
- How will outside siblings with ownership influence the business?
- How is dad transferring ownership?
- Are the kids buying the business or is the business being gifted?
- What estate planning needs to be accomplished for dad?
- What are the tax implications for mom and dad?
- What are the tax implications for the child or children?
- How will the transition be announced?
- What will non-family employees expect?
This is not meant to be a comprehensive list but even at that, it is easy to see there is an incredible amount of work that needs to be done here.
I recommend hiring professional help, particularly for estate and tax planning.
This work is critical and should be done earlier than people usually think. From my experience, this type of planning will do more to keep the family pulling together than any other single thing.
I think most dads put this off because one, they are afraid to face their mortality and two, there are often hard decisions to be made—and hard conversations to have—with their son or sons and rather than face those hard conversations it is easier to just procrastinate.
Hard conversations are, of course, difficult, but weigh that challenge against the silent but growing angst that will be bubbling inside the business among family heirs. Those feelings and frustrations will chip away at your company’s morale, leadership, vision, mission, and performance.
Family members will not stop working but they will lose that passion and edge necessary to really drive the business forward. Rather than giving it their all, they will think to themselves, “Why should I bust my tail when I have no idea what my future looks like in the business?”
A succession plan gives everyone in the company a clear vision to the future—something they can agree upon and something that they can work hard to accomplish.
Fathers should realize that succession planning is not so much about throwing their own selves out of the business but about giving their children a plan to succeed them in a marvelous way. If done right, the father’s success will be magnified when the children are empowered to succeed.
This can and should last for generations. Seedling businesses can become family treasures that will be the best legacy any father could hope to accomplish.