There are many advantages to owning and operating a family business. Increased stability, commitment and flexibility, alongside having something of value to pass along to the next generation, are just a few. However, there can also be disadvantages or areas where owners might need to re-think their plans if the business is to remain successful after retirement.
One of the key challenges facing most family business owners is succession planning. While studies have shown that employee engagement would be significantly boosted where they to know a clearly defined succession plan was already in place, other research suggests that only a small percentage of family-run businesses actually have one.
Dr Edgar Paltzer specialises in succession planning for family establishments as part of his legal practice, and he understands the necessity of having a solid succession plan in place as early as possible.
Establish Objectives and Goals
A good succession plan establishes the objectives and goals of the business and aligns them with those of the family. This may include determining the importance of continuing family involvement at the senior level and being prepared to bring in outside talent if there is no appropriate successor. It may also include looking at the retirement goals of the outgoing owners and managers.
Identify Successors and Other Roles
It may be that the owner of a family-run business automatically wants to pass it on to their children or to their eldest child. However, that may not be the best person for the job. It may be better to keep the business in the family by passing it on to another family member better suited for the role, while identifying different active and non-active roles for other members of the family.
Create a Transition Plan
Successful transitions of ownership take time. A transition plan should account for ensuring the new owners and management team have already spent enough time learning the business from the inside before they are expected to take over. A good transition plan will include identifying areas where further training and experience is required and outline how that will take place.
One way to ensure a succession plan is clear is to employ a professional such as Dr Edgar Paltzer to assist in its creation. Outside professional help brings expert knowledge to the table and unbiased opinions, which can be invaluable within the scope of a family business.