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“The only rock I know that stays steady, the only institution I know that works, is the family.” —Lee Iacocca
Well, some might agree with Lee, but certainly for families that go through lots of difficulties, they don’t “work” in the same way.
Recently someone asked on LinkedIn:
What’s the real price for for the family business without a succession plan? For the family relationships – for the continued success of the business?
Well, the answer depends, there certainly is a cost. Once a business starts running and functioning there should be some thought into a succession plan. Just like families save and work on their finances to start and invest in the business, they should start succession planning when the business is in operation. After all, what will happen in unpredictable circumstance or emergency?
It definitely weighs heavy on the family and on the continued growth of the business to not have any succession plan in place. Family business planning includes finances (a great white paper and template on the financial side of succession planning is provided for free from the American Institute of CPAs here). The keys to succession planning, are within the word “succession” itself– i.e. “success” is in the word. So how do you achieve success in planning? Though HR Zone talks about succession planning from a non-family owned business, it still has some examples that can be adopted for families strategizing succession:
1. Succession planning must be aligned with medium and long-term business strategy. It’s easy to think in the short term, or even to pick up the pieces in the wake of an emergency. As plans don’t always go as hoped, it’s better to strategize for the long term.
2. Look in and out of the organization. It’s easy to bring in a family member, but if the right talent is outside the organization, it can be a missed opportunity. Having a list of trusted people the owners can look to with planning is important for success.
3. “Failing to prepare, is preparing to fail”, all members of a business, family or not, are important for succession planning,
Baylor’s Institute of Family Business has a small list from research they carried out on the importance of succession and retirement planning (from most to least important):
- -Health (Mental and physical)
- Wealth Management (financial)
- Psychological well being/family relationships
- Wealth transfer
- Continuity of enterprise
- Transfer of Ownership
- Leadership succession
There are many ways to plan for succession, but the most important point is to have a plan in place, whether or not it follows through.