Running a family business can be a lot of work, and it is not something everyone is cut out for. Although you may love your job, you cannot work forever, and it is not always safe to assume the next generation will be able to take over when the time is right.
There are numerous obstacles that can get in the way of a family business successfully transitioning from one generation to the next, including a lack of interest from the next generation, family squabbles and inadequate skills. Creating and implementing a succession plan early can help you prepare your business to overcome potential obstacles that may impede a successful transition.
Who will take on key positions in the business?
One key function of your succession plan should be to identify who might take on essential positions within the business. Essential positions may include the owner, the executive and the governing board, among others.
Finding candidates for these roles can be challenging because you must balance the needs of the business with the desires of family members. Sometimes family members make appropriate candidates. Other times appropriate candidates must be found from elsewhere, either within or outside of the business.
How will these people be trained?
Once you have identified potential successors, you should consider how these people will acquire the skills they need to be successful in their future roles. Often founders will mentor their successors and establish training programs for other important leadership positions. Other times founders may require possible successors to gain a college degree or a certain amount of work history outside the company to ensure they have the needed skills.
How will the business’s wealth be distributed?
A good succession plan should also address how the business’s wealth will be distributed each time a new owner takes over. Should each family member receive a share of the wealth, and if so, should each share be equal? Would it make more sense to distribute wealth based on contribution to the business? When deciding how money should be distributed, it is also important to consider the impact each option could have to the business over time.
Although business succession planning is rarely an urgent part of the work day, it can be helpful to establish a plan several years before any transition is expected to occur. Succession plans tend to be more successful when there is ample time to implement them, and having a plan already in place can help minimize disruptions to the business if something unexpected were to happen to you or to another business leader.