“Failure to plan, is planning to fail” (Not sure who exactly said this, google search reveals Alan Lakein may have said it first).
Transitioning in family businesses and succession planning are a difficult and tricky business. According to Forbes, a third of businesses make it to the second generation, and an even smaller portion make it to the fourth generation. 60% of business owners are over age 55, and 1/3rd are over age 65. And it makes sense, business owners are focused on their goals and building up their company, that they don’t think about who will take over. What steps can family business owners take to transition successfully?
Before going into our 5 tips, there are four considerations to look at in family business transitions, according to James Fitts and Marshall Rowe, in their 2011 white paper which is quite comprehensive, Family Business Transition Planning: 1. Management, whose going to look at the day to day operations. 2. Ownership, who will own the business in the future. 3. Operational, how will the business continue operations going forward. 4. Emergency, how will the family operate in case of emergencies. I will also add my own here, 5. Emotional Stress, and it seems silly to include this, but it is really true, who will the owners, successors talk with when there are troubles, are there people they can use as confidants to help them in the transition?
3 tips for Succession and Transition planning for family businesses
1. The Forbes article mentioned above includes Business Life Insurance, to pay out money to successors of the family business
2. Create a Succession Plan, outlining how the business will continue to operate, post retirement/emergency.
3. Start the process, don’t wait till it’s too late to sit down and create a plan, even if you’re over 65, start now.
Further place to look at for more information is PWC’s family business service site: http://www.pwc.com/gx/en/family-business-services/business-transition.jhtml