It takes more than you may think.
Starting succession planning early is something that most small businesses avoid doing, and that’s likely because it can be a difficult subject to discuss.
According to a 2017 BDC(provide source) survey, five out of six entrepreneurs believe the business succession process from one generation to the next can be completed in two years….
In reality, succession can be a very complex process that may take upwards of 5-10 years to transition.
Sometimes, Day-To-Day business activities may seem to be more important than difficult subjects like succession, family estates, and even death.
So what can we do?
An owner that plans to one day exit their business must face these challenging topics if the business is to survive its next generation of ownership.
Unfortunately, most business owners don’t begin to plan for succession until later in life, if at all…
Should I just leave the transition to someone else?
This complicated subject may appear to be something lawyers and accountants will take care of, but business succession planning (which includes family dynamics, money, ownership, duties, leadership, key employees, and clients) is an important conversation to have.
Succession planning needs to begin years before an owner steps away from the business.
The main reason for planning business transitions in advance is that it allows both the successor and exiting owner to learn to work with one another and move forward as partners.
We understand why business owners want to avoid discussions about such a difficult subject. It may feel like running the business is your main priority, however transitioning the business is inevitable.
From the author’s experience with his own family business succession, we can assure you, talking to your children about taking over the family business can be the most emotional and exciting conversation of your life.
5 Step Guide
Your Family Business
Many business owners postpone succession planning for their family business because they don’t see themselves retiring and aren’t ready to transition their business.
However, sometimes we need to tackle unexpected health issues which could get in the way of our succession planning. We recommend “ripping the band-aid off” and starting the conversation early.
STEP 1: Begin The Conversation
At this point, your son or daughter might not want to take over the business yet.
The reality is you’re asking them to devote their lives and careers to the future of the company.
If there are multiple siblings involved, considering skills and future aspirations can make transitioning a family business more complicated. Regardless of where you’re at, the first step is to start talking about a family business transition plan.
STEP 2: Don’t Let it Get Personal
Not letting our emotions affect us is easier said than done.
However, family business transition planning is just business, continuity and success of the company is our main goal.
We highly recommend finding a family business advisor and as a successor, your own advisor other than the owner (not Mom or Dad), to gain a better perspective.
STEP 3: The Kids Will Have A New Vision
Once the chosen successor is on board, the vision for the company will likely change.
Agreeing on big and small decisions that transform the course and direction of growth may become more difficult.
It may no longer be Mom or Dad’s vision anymore and accepting this can be a big pill to swallow. Navigating this new reality may be difficult and is something to consider from the beginning of the succession process.
STEP 4: Say No to Special Family Treatment
During the family business succession planning process, key employees will know about the transition plan and how they feel about this upcoming leader is an important element to keep in mind.
The key is to hold the successor up to the same standards as everyone else.
By keeping the successor up to the same standards, we can ensure employees feel secure and trust the direction of the transition.
STEP 5: Respect The New Family CEO
Once you have completed succession planning correctly, the original founder should be stepping away entirely.
The new family business successor will likely redefine the CEO role and this is something you need to be prepared to accept.
Develop your son or daughter to the best of your ability and have faith and confidence in their decisions.
HR is an enormous component and as stated earlier, the company’s key employees might not have the same faith or perspective about the future.
Informing your staff about the future is important to the success of the succession planning.
Some senior management members may disagree with the leadership vision and leave the company all together.
It’s crucial for the human resources department to be involved in the development, mentoring, and shadowing of the new successor in order to stay on track priming and implementing the succession plan.
Succession planning takes longer than you think.
According to a 2017 BDC(provide source) survey, five out of six entrepreneurs believe the business succession process from one generation to the next can be completed in two years. In reality, succession can be a very complex process that may take upwards of 5-10 years to transition.
You can read our book Secrets To Succession to get the whole story on how we transitioned our family business.
Your future successor might be 10, 20, 30, or even 40 years old by the time you start planning for succession. Talking to your team about the future leadership of the company is crucial to the longevity, survival of the business and family relationships. Creating a succession plan, executing it, and enduring the transition is a monumental task, so getting a head start is very beneficial.
We encourage you to begin making those phone calls to your accountant and your lawyer to get the process started. From there you may also need to involve other professionals such as a business consultant, a financial and estate planner, and more. This team of professionals will get you on the right track and mindset for family business succession.
Secrets To Succession is a book written by first-hand successor, Gerard Gust, who was groomed from a young age to take over the family business. At only 33 years old, he was able to retire his father in half the time they had planned. Gerard shares his own succession process, what works and what doesn’t in order to help other family businesses prepare, implement, and endure the complex family succession process.
“The odds were stacked against us but the strategies shared in this book helped us succeed, and you can do it too!” – Gerard Gust