Succession planning is one of the most difficult processes in business whether they are small enterprises or multinational corporations and this becomes even more difficult in the case of a family owned business. This following article gives some pointers that can apply in family owned firms.
Seeking new executives
Succession planning in a family owned firm is the process of seeking new executives who can succeed the current ones as they proceed into retirement. The process can result in the new business leaders coming from inside or outside the family. The main concerns of those running a family owned business should revolve around management and ownership. This distinction means that the current leaders actually have flexible options that they need to ponder on. An executive who runs a family owned business has the option of retaining ownership and transferring management. This can occur in the event that they still want to benefit from the firm. In this case, business succession planning involves seeking qualified professionals inside and outside the family to assume the management functions only. The executives eventually hired may or may not include younger family members and the only worry that the owner may have is on how to transfer ownership in the event of his/her death.
Relinquish their posts
However, some family owned businesses have owners who want to relinquish their posts as well as ownership. In this case, the succession planning process will involve a transfer of management as well as equity to a suitable successor. The owner has the option of transferring ownership to younger relatives and management to the best professionals. Alternatively, they can transfer both ownership and management to younger relatives capable of maintaining and improving the firm. Lastly, they may decide to sell the business altogether, in the event that the younger relatives are unwilling or unable to take up a leadership role in the firm.
Family business succession planning aims at steering the handover process from the current managers and owners to future managers and/or owners.
The two surest ways of derailing this process are succession taxes and family disagreements. If these are to be controlled, adequate preparations should commence early. The most important point issues in this process include the following. First, the family must be involved in the process. Second, the succession should be commensurate to ability since beneficiaries are not equally competent. Third, the mentoring of the successor should begin early in the process. Lastly, the owners can invite external experts who understand to help so as to boost the process.