Family Business Succession – The Why & What’s Really Important?
It is important to establish strong communication channels between the business owner and their immediate family.
In order to help facilitate a successful transfer of ownership for family businesses, many advisors adhere to strict technical, financial, and legal structures that govern succession planning. However, in order to develop and implement a strong, personalized plan, advisors must also understand the goals of all involved in the transfer—they must understand the “why” behind the succession plan.
In order to determine the “why,” a financial advisor needs to recognize, and remain sensitive to the interpersonal relationships relevant to the family business. Each family business has unique assets, as well as challenges and personalities that need to be taken into consideration.
For example, it is quite common for family members to make assumptions regarding the transition of management, and this can easily lead to personal conflicts. For that reason, it is important to establish strong communication channels between the business owner and their immediate family.
This maximizes the potential for a successful transition, and minimizes misunderstandings. It can also help quell any suspicions surrounding favouritism or opportunism between family members. A communications strategy may seem like an obvious requirement for a succession plan, but it is often neglected or overlooked.
As part of the communications strategy, an advisor should work with family members to help determine what role they each want to play post-transition, or more importantly, what role they are best suited to play. Personality profiling systems can be helpful to asses each person’s strengths and interests in relation to the business. This process can also help create realistic expectations about the succession, especially regarding management roles.
The next step is a clear, mutually agreed upon delineation of duties and responsibilities. This is an important part of ensuring the business’ future viability, and allows family members to fully contribute to the overall, long-term success of the organization. Having a common goal and understanding what role each member plays in achieving this goal, will facilitate an ease in owner transfer, and strengthen the business’ overall vision and culture.
Having a common goal for the future is energizing, and an effective business succession plan should inspire the next generation of business owners and meet the needs of all concerned—throughout the transition process, as well as after the transfer of ownership is complete.
Understanding the “why” behind a succession plan will ensure a unified, transparent, and supportive transition process. Once this question has been answered for all involved in the succession, an advisor can help create and implement a strategy that is reflective of your family business’ vision and values, which will help ensure a vibrant, long-term legacy.