Recently, I attended a speech related to business succession planning in family-owned businesses. The speakers included a panel of three majority shareholders of family-owned businesses, one of which was working on its fourth generation of ownership. There were several excellent ideas and insights shared that I would like to share with you below. Here are some of the key findings in my opinion:
- Running a family business can be more challenging than one can imagine. It is important to be alert and sensitive to where the challenges lie.
- When you designate a successor, even if it’s a family member, you must be honest and determine if that individual has the right skillset to run the company.
- You must make sure that the designated successor is the right person to be running the company in five to seven years, not just in the next year or two.
- Once a designated successor is chosen, you must get buy in or acceptance of family members, including those who are not involved in the family business.
- It was highly suggested that offspring should first work in another capacity at another business before joining the family company. This could range from as short as two years to as long as five to seven years. This helps build skills and allows your children to learn important perspectives from different business leaders.
- The older generations move is usually to become Chairman of the Board. When this happens, the Chairman has to be prepared to keep his hands off to a great degree and let his children figure things out on their own.
- Getting the buy in from key business partners and key executives involved with the business is critical. If they feel that the “kid” is blocking their career path or don’t have the skills to get the job done, you will see attrition.
Although this list is not exhaustive, it provides some key insights any owners dealing with business succession should be aware of.