5 Tips for Planning Succession in Your Family Business
1st March 2018
Less than half of UK small and medium family businesses have some form of succession plan in place, according to recent research by Legal & General. Out of the over 800 small businesses surveyed, about 48% of family firms rated death or critical illness of the owner as the highest risk to the future of their business.
The good news is that these risks do not have to be risks at all, provided you start thinking, and planning, for the long term. In this article we share some key tips to help you future proof your family business.
It is vital to start planning for the long term as early as possible. What will your business look like tomorrow? Where do you want it to be? How will you get there? If you’re busy running day to day operations or trying to avoid difficult and emotional conversations, you may think you can postpone planning for succession. Don’t! Putting off planning can risk the future of your business.
Review your plans
Succession planning is not a one-time thing. The world changes and with it people’s needs and perspectives. The family grows and the business evolves, which means that what works today might not work tomorrow. So it is important to review your structures over time.
Engage the next generation
Engaging the next generation is the perennial family business challenge. When do I start talking to my kids about the business? When should they get involved? The answer is that it is never too early for your next generation to become familiar and engage with the business. Most of the time you will find that they are interested and care for the business. Even if they do not want to start their career working in the family firm, this does not mean they never will. It is often better for them and the business if younger family members gain experience outside first, so they come in committed, with new skills and fresh perspectives.
Think about your retirement
Thinking about what you will do when you retire is helpful for you as well as the business. Not being involved in the day-to-day management of the business does not mean you will not be an owner anymore. You can also still get involved, but it is important that you discuss what your role will be with your family and those managing the business, so that everyone knows what to expect.
It seems obvious, but good communication is vital for the successful functioning of your family business, now and in the future. Some conversations may not be easy or comfortable, we all know in families there can be tensions. But it is important to create an environment where people are comfortable saying what they feel. This helps to reach a good understanding of the different views, perspectives and to increase trust.
If you would like to explore how you can best prepare for the future and start thinking about succession planning, download our free guide here.