Succession Planning for Family Businesses: Securing the Future

For any family business, succession planning is a vital process to go through. It is all about putting together a strategy for the transfer of both leadership and ownership to the next generation. If the business is going to thrive in the future, everyone needs to know exactly where they stand and the part they will play in that. In this blog, we are going to look at the importance of succession planning, and strategies for the successful transition to keep a family business running smoothly.

Importance of Succession Planning

Family businesses often face unique challenges compared to regular businesses, mainly due to their customer base being invested in the family story. Different threats can affect the longevity of family businesses, including complex family dynamics, and conflict over the future vision of the business. Succession planning can help overcome some of these issues, making the transition to the next generation seamless.

1. Continuity & stability

By taking the time to plan for the future, the business will remain stable during change, allowing operations to continue as normal so customers stay happy with the service they receive.

2. Secure finances

A succession plan will protect the financial interests of the family, ensuring the business will remain profitable during the transition.

3. Retained talent

Taking the time to identify future leaders allows them time to be trained in all the important aspects of the business before the handover occurs.

4. Mitigates conflict

Having a clear plan in place, along with open communication between all stakeholders ensures that disputes and misunderstandings are kept to a minimum.

Key Steps In Succession Planning

Succession planning is a process that includes several stages, and active participation is required from all stakeholders throughout the generations. Here are the main steps to go through:

• Assess the current situation: examine the organisational structure of the business, who is responsible for what, and any areas that require improvement.
• Identify potential successors: once time has been spent reviewing the skills required for future leaders, it is time to consider whether external candidates are going to be brought into the business, or whether family members can carry out the roles.
• Developing a succession plan: this is the key part, where the business objectives are written down and long-term business strategies are created.
• Communicate the plan: any current and future stakeholders need to be involved with the plan to make sure everyone knows their role in the future of the business.
• Implementation & monitoring: like most things in business, the key is to test and measure. Implement the succession plan one stage at a time, and monitor how the business runs with these changes.

Challenges In Succession Planning

Within any business, change can be incredibly hard to implement, but even more so in a family-run business. There are bound to be some people not happy with the decisions made, so let’s have a deeper look at some of the challenges that may occur and how to prevent these:

1. Resistance to change

Long-standing leaders may not be quite so keen on the idea of changing roles or stepping down, so it is key to remain sensitive during this transitional period.

2. Balancing the interests of the family & the business

Personal relationships combined with business can often become tricky to manage. By laying everything out on the table and having clear policies, everyone will know exactly where they stand.

3. Unprepared successors

Potential successors may not be ready to take on leadership roles, particularly if they haven’t got much experience within the family business. By noticing this early on, there is time to include training and development into the succession plan.

4. Legal & financial implications

There are lots of legal and financial issues that can arise when growing a family business, so engaging with professionals early on can help reduce these risks. Succession planning is essential for both the stability and the long-term success of a family business. Starting early is key so that everything is all in place when the time comes to hand the business over to the next generation. If you would like any further advice on succession planning, contact the experts at Wright Vigar today.