You’ve grown the family business. The long hours you’ve spent, risks you’ve taken, hard decisions you’ve had to make, and ideas you’ve had have shaped the business into what it is today. You’re proud – and you should be!
But the day will soon come when you have to hand down the family business to the next generation. That’s scary for most people – but it doesn’t have to be.
Succession planning is one of the hardest things to talk about in a family business, let alone accomplish. When you add the element of managing important and complex family relationships to any business transition, it’s tough – but rarely out of reach.
Here are five actionable steps you can take to ensure a smooth handoff, when the time comes.
1. Create a formal transition plan.
Succession plans are step-by-step outlines of everything that needs to happen for an effective transition. A succession plan isn’t a one-time event – we recommend measuring progress and modifying as needed.
Three quick examples on great ways we’ve seen this done:
- Begin with the end in mind. If you can, set a target date for the official handoff to take place. Starting on that day, identify and name the role each person will assume.
- Start transitioning responsibilities slowly. This will help the successor establish credibility with the rest of the team.
- Create a safety net just in case things aren’t working as planned. This can be as simple as setting an agreement that if your successor doesn’t meet certain milestones, he or she doesn’t automatically take over the reigns.
2. Develop your exit strategy together.
It’ll be a lot easier for your successor to manage the transition if you create your exit plan together. Think about details such as your benefits, legacy, and change in work schedule – as well as how this will all be communicated to the team. (from ASAE)
3. Set core values and a clear vision for your business.
A vision is critical to the long-term success of any company, and your family business is no exception. This is especially true during a leadership change. Your vision and core values should give your successor a north star to follow and guardrails for decision-making.
4. Start planning as early as you can.
If you’ve been thinking about the transition lately, it’s time to start seriously planning for it. One of the big problems in leadership handoffs is a lack of planning. Usually, the plan is created only in last-minute situations – such as an unexpected illness or death. In fact, only 16% of family businesses have a documented plan ahead of time!
Creating a succession plan early on will help you ensure a smooth transition, whenever the time comes. That’s why we recommend making a plan years in advance. An early start will give you the chance to set clear expectations, talk to everyone involved, and make sure you’re all on the same page.
5. Communicate with and involve others.
Another common belief is that the succession plan is secretly developed behind closed doors, and only among leadership. That can quickly create distrust and stress among the rest of your team.
The succession plan will affect everyone in the business, so it shouldn’t be viewed as top-secret. The more managers and employees know, the more that clarity and confidence will prevail. Encourage your family to speak directly and honestly about their feelings around the transition. If you can help everyone understand the vision, you can move forward through misunderstandings and conflict to find resolution (more on managing conflict here.)
Are you in the process of planning a leadership transition? Many times, working with an experienced advisor during periods of transition can help you manage communication and potential conflict, both within your family or your employees. I’d be happy to talk with you for a few minutes about your transition – just schedule a time to talk.
A succession plan can help ensure that your business can support your family for generations to come. For free business planning resources, visit our resource library.
