It likely comes as no surprise that 62% of family businesses are passed on to the next generation. However, you may be shocked to learn that only 18% are done with proper succession planning. Lack of succession planning can adversely affect the success of the company.
The Most Difficult Transition
The most difficult transition for a business is when it is passed between the first and second generation. The reason is most likely because this type of transition has never occurred for the business, so each challenge will be new. Because the business has had the same leadership until this point, there will need to be considerations for the new vision and leadership style going forward. You can smooth the transition by doing the following:
- Create a family vision
- Prepare for challenges
- Create a transition plan
Second to Third Generation Transition
This scenario is likely easier than the first one described. The reason is that now the business can rely on the previous experience to help them through the process. Still, there will need to be some care given to how this particular transition will take place. In order to make sure that the succession goes as planned, you should prepare for the following:
- Create a family employment policy
- Create a board of directors
- Prepare for following generations
- Fine tune the succession plan
Succession Planning Overview
Succession is a pretty common occurrence among family business owners. However, care should be given to ensure that the transition is smooth and doesn’t cause negative disruption to the operation. Failure to complete proper planning could mean issues for the business and even cause family strife.
It’s important to remember that this process is lengthy and may require considerable amount of time before it is completed. Consider the bigger picture when making changes to the company during this time, and ensure that you remain true to the company and the family’s vision.
For more business planning advice, check out Forecasting: Optimizing Business Planning.