We all want to look after our family – and business owners are no different.
You’ve spent lots of time and money growing the business and most of us would like to ‘keep things in the family’.
There are four (4) key areas to consider, namely;
1. Choosing a successor
2. Ownership and management
3. Legal and financing issues
4. Dispute resolution
Choosing a successor starts with identifying whether or not your successor(s) really want to do it. Do they have the skills and degree of commitment and goals to manage and grow the business ?
By choosing one successor, how will this impact on other family members ? All beneficiaries need to be part of the process in agreeing how the business should be run.
Essentially, the successor needs to earn the right, rather than be given it. Setup a trail period where the successor works in different areas of the business and see how they perform – and take advice from respected non-family colleagues that have your vested interests at heart.
Once the succession plan has been agreed, you need to look at ownership, management, and control.
Will you transfer management and ownership in one step ?
Which family members will be involved and what are their roles ?
What role will you play in advising, mentoring and supporter your successor ?
Establish long term goals and performance measures from the start.
Financials and legals are also a key component of the succession plan.
Having the right operating structure in place (it may be a trust), and whether you are gifting or selling the business ?
Getting a professional business valuation to assist in avoiding expensive financial disputes.
What’s your earn out preference – regular dividend or lump sum payment ?
Finally, open communication is an absolute key. Sit down with all the stakeholders monthly to review the succession plan – welcome their input and feedback.
Family businesses can be a fairly emotional environment so having an independent legal, financial, or trusted adviser may also help keep everyone on course.
Over the years I’ve seen some wonderful family transitional outcomes, and many others that have ended in tears and pain.