Family business transition planning is always difficult. This fact couldn’t be more evident than in the case when one generation of one family needs to pass the torch of the company they worked so hard to build to their designated successors. Although this seems like the most natural process in the world, the stats paint an entirely different picture.
Namely, according to a recent article published by Forbes, only one-third of the companies survives a transition to the second generation of owners, and an additional 50% close the doors when the time comes for the third generation to take over.
Let us take a look then at a couple of ways you can prevent this problem and secure your business legacy in many decades to come.
Think of succession as a long-term process
Countless parents out there are trying to somehow keep their family lives protected by leaving any kind of business talk outside the house. That is a big mistake since the kids that are raised in this way have a very poor understanding and appreciation of the workings within the business world so when the time comes for them to take reigns, they are horribly unprepared. Don’t make this mistake and start bringing in your successors under the hood while they are still young. Be open to discussing hard topics, bring them to work so they can get a taste of it, and try to incite the love for the company from an early age.
Present a succession as an option
Trying to force succession upon your kids can cause a very strong resistance, especially while they are going through the sensitive teenage years. Be that as it may, these are the years when people make important decisions about their future so you will need to prepare yourself for one very challenging and tactical conversation. What’s important to remember is that you don’t want to pressure your children into doing something but rather present them with all the benefits that come with running a company. Offering non-conditional support for whatever decision they make is something you absolutely must do.
Make sure everything runs smoothly from a legal standpoint
Whatever decision you reach in the end, you have to make sure that the division of your estate runs smoothly and without any legal disputes. If you fail to address these problems, the process of succession can drown in various parties challenging the will and often poisonous disputes. This is something you absolutely want to avoid both for the sake of your company and your family. So, look for experienced wills and estates lawyers and start putting together your will as early as possible. And don’t postpone this decision even if you are still young and healthy – you want to cover all unpredictable situations.
Allow your kids to get some outside experience
Even if your children willfully accept to take over the company you worked so hard to build, grooming them directly into the owner position will deprive them of the valuable business experience you used to make your company successful in the first place. So, give your successors freedom to find their own jobs, explore different career paths, and find that contemporary experience that will allow your company to endure one more generation and your legacy to endure. Also, forging an independent career path will lend your successors a great deal of confidence that will allow them to run the company efficiently.
Encourage the development of complementary skills
While your successors should have complete freedom to choose their own future and pursue different career goals if they wish, you should encourage the development of complementary skills that should help them fill a leadership position if the opportunity arises. Of course, by this, we don’t only think about the skills that are necessarily related to your native industry or even general corporate expertise. Good leaders have a killer set of soft skills so encourage your children to harness traits like effective communication, responsibility, decisiveness, critical thinking, and all other things that can help them run a company. Enlisting the help of a Family Business Consultant can prove beneficial in preparing a family business for succession. Skills such as conflict resolution, succession planning and business assessment can be taught to ensure longevity within a family business.
We hope these few examples gave you a general idea about the moves you should make to ensure your successors are able to take over and successfully run the company you worked so hard to build. What’s an important thing to remember is that succession is a long process that ideally starts in childhood. The sooner you start grooming your children to fill in the position at the head of the company, the better.