Succession Planning for your Business
Starting up your own family-run business can be an ideal opportunity to pursue your passions and really enjoy your work, while at the same time building a legacy that can be left for future generations of your family.
Planning for the future, and for your eventual retirement from your business, may fill you with dread. It can be very difficult to say a final goodbye to something that you created from scratch and has dominated the vast majority of your thoughts and waking hours for many years. However, a plan of succession has to be put in place if you want to see your years of hard work passed down to your children and continue to thrive.
It may not be too surprising to learn that according to PWC’s 2017 Family Business survey, just 13% of UK family business owners have a robust, documented and communicated succession plan in place. Succession planning isn’t as straightforward as most people think. It isn’t as simple as handing the company keys to your first-born child and walking away. It is much more involved than that.
Considerations for a successful succession
What needs to be taken into consideration for your future plans is not only your current business practices, but what needs to be put in place to ensure a smooth transition and planning for activities that can help future growth.
When it comes to handing over a family-run business, you also have to consider what aspirations your children have for the company as well as themselves. What you may have in mind for the future of your company may be very different to what you children envisage.
What if your children don’t have the same level of passion and drive for your business as you do? Will they have what it takes to help the company grow and thrive, or will they simply be planning to go through the motions to keep the business ticking over as it is today? You have to consider whether your children have the same emotional attachment to the business that you have, or whether they have other ambitions outside of the constraints of your company that they want to achieve. Will they see the responsibilities of running the family business more of a burden than a bonus?
It may be a hard realisation to grasp, but maybe you wouldn’t be doing your children any favours by handing them your business, especially if the company has been built up around your own set of unique skills and knowledge that your children may not posses. You need to ask yourself if the company could survive without you if you should simply step away. If there is no-one that can fill your shoes, then maybe you have a business that simply could not survive without you.
In this case, then it may be more practical to wind up the business rather than see it struggle to survive.
Work out a plan of action
No matter whether you have a keen family member that is willing to take on the business when you retire, or you don’t have anyone to leave your business to, you will still need to develop a strategy and have a plan of action in place for when it comes time to step away from your business.
Winding up the business
When you don’t have a family member to take on your business, then you need to make sure that everyone involved in the company is kept well informed of where the business is heading. If you have employees working for you that are likely to lose their jobs should you plan to wind up your business when you retire, then it is only fair that they are aware of this so they can have plenty of to make alternate arrangements, such as finding a new job, or taking early retirement.
Forming a new company structure
When you do have family members willing to step up to the plate once you retire, then you need to study your family members capabilities and fill in any skills gaps that are obvious to you. This could mean either training certain members of your family to learn new skills or gain experience in weak areas.
Start to build a company structure around the skills that your family members posses. Utilising their natural strength and capabilities and putting them into the right company position for those skills will be the cornerstone to the future success of your family business.
Relieve the administrative burden
With a lot of family-run businesses, especially small ones with no extra employees, it is often the case that all of your family members will ‘muck-in’ with the day to day running of your company, including administrative tasks such as answering the telephone and dealing with your business post. Removing yourself from your workplace will leave a gap that your children will need to fill. It is at times like these where you can help to reduce the load on their shoulders by outsourcing your day to day administration duties that can be a big drain on their time and energies.
By outsourcing these time-consuming, yet essential everyday tasks to a provider such as us and utilising our range of Virtual Office Services for your business will free up a lot of much needed time. This will allow your family members to focus on the more important tasks of running your business, without having to worry about missing vital business calls or missing important postal documents that need your attention.
Having a clear strategy in place for the day of your retirement will ensure a smooth transition of responsibilities to your family members. Selecting the right successors to fill those essential roles in your company structure will help to make your business more robust for the future.
Even though you have a family business, you cannot let your emotions get the better of you with regards to your decision making. Selecting which family member takes on certain responsibilities and roles within your new company structure should be based on merit and natural ability. You have to develop a level of emotional detachment when making these decisions to prevent you putting people into the wrong roles. Think like a business owner rather than as a parent.
While the desire to be fair to all of your children and other family members that may be involved in the handover of your business once you retire, the worst mistake you can make is to let your heart rule your head. For example, you may have two grown up children, so you may think that it is only right and fair that you divide the company down the middle giving each child 50% of the business.
But what if only one of your two children has the desire to carry on your family business? What if the other child wants to do other things with their life and doesn’t want to be burdened with the responsibility of running a business? This could result in one of your children struggling to manage the pressures to keep the company afloat, while also dealing with a painful family rift with their sibling. This is where ‘being fair’ is in truth hardly fair at all!
You also have to consider whether handing over 50% of the business to each child may cause a power struggle where each child has a different idea about the future direction of the company. With each child having no overall control of the business, the company could find itself floundering in the status-quo and not moving anywhere.
It may be a difficult decision to make, but you may have to consider putting the company into the hands of just one of your children to manage. Your other children may be happy to accept a support role where they can utilise their own skill-set, but also be free of the heavy responsibilities that come with being the boss.
Give yourself plenty of time
Even if you cannot see yourself retiring for the next few years, you can never start making your succession plans too early. Starting now will give you plenty of time to develop a plan where any skills gaps in your company can be addressed and experience gained by family members before you retire.
Remember, some direct and often painful family discussions will need to be held. There will also be time needed for recovery, acceptance and adjustment to your proposed new succession plans. This is why you need to give yourself a good four or five years of preparation to get your succession plan to work and be put in place once your retirement arrives.
Everyone in your company – both family and employees – can see you growing older. They will be wondering what will happen to their jobs when you finally retire. Don’t keep them in the dark. Work out your succession plan and share it with your family and staff members so that everyone can be well-equipped for the future.