Tips for Effective Family Business Succession Planning

Some small business experts say you should commence exit planning on the day you start your business. This may be too extreme in most cases, but it’s absolutely certain that succession planning should be a key element in your business forecast at least five to ten years ahead of time.

Because of the peculiar complications associated with a family business, planning for your eventual departure becomes even more critical. The longer ahead you begin planning for this inevitably, the more time you have to get things right.

Here are tips on getting the process underway and preventing some family imbroglios later on:

Start communicating now. Family members want to know your goals for succession and how they may or may not fit in. Waiting to announce your plans a few days or weeks before you leave the business is a recipe for disaster. When you let family members know what you’re thinking about long before the event, they can start contemplating this eventuality as well. This helps get distracting emotions and family baggage out of the way sooner rather than later. (Communicating early also defuses erroneous perceptions some family members might have about their possible future roles.) As part of this process, canvas the appropriate individuals to learn what ideas and ambitions they currently have about the family business. Does someone have a radically different vision of where the business should be after you’re out of the picture? It’s best to know this now. Discussions should also revolve around related issues such as disability, divorce and early retirement.

Make a realistic assessment of your family members’ leadership potential. Many parents have a fanciful idea that their first-born son or daughter is a “natural fit” to succeed them as CEO or owner. But the annals of business are littered with catastrophic examples of a first-born’s lack of ability to follow in his or her parent’s footsteps. Different children have different innate or learned business skills. It’s far preferable to realistically assess each of your offspring’s leadership potential rather than cling to a fairy tale notion that your oldest child will seamlessly take over when you depart. Keep emotion out of your selection process. The most qualified person is the best choice to assume control of the business.

Start the successor training early. Once you make a clear choice about your successor, don’t put off involving them until the last minute. The better prepared they are, the more equipped they’ll be to handle the challenges ahead. Consider starting the process a year or two prior to your planned departure. Not only does this enable your successor to become more adept at handling CEO-level or ownership duties, it helps put them in a “leadership mindset” – an intangible, but extremely valuable quality for every leader to have.

Get outside help. Succession planning for your family business can be complex and time-consuming. There’s no reason you have to do it all on your own. Look into the specialists trained in this area—lawyers, accountants, financial advisors—as well as peer advisory groups, where CEOs and business owners who have gone through the process can share the lessons they’ve learned. Help is out there for this vital business concern. You just have to go looking for it.

Learn how CEOs and business owners like you are overcoming strategic and operational challenges to grow their business. We invite you to download a free white paper, “Real-Time ROI: The Value of Participation in a Professionally Managed Peer Advisory Group.”