A failure to plan seriously for succession can lead to rising disillusionment among the next generation.
- Have a written exit and succession plan from the beginning.
- Share it with your proposed successors and include them in the governance and management of the business.
- Share and review your plan with your professional advisers.
Many people set up a family business because they hope to build a legacy that will remain within and provide for the family.
This is likely to be a long-term plan, with details that can only, and should only, be finalised once you have a good idea of the position that the family business will likely be in when the time comes to start the handover process.
However, losing sight of where you are heading can be straightforward. You should regularly review your plans with your professional advisers. The business is your baby, and whilst you may have good intentions of handing the reins over to the next generation until something is seriously thought through it is easy for a two-year plan to slip into a five-year plan and then into a ten-year program.
The result can be that decisions may not be in the best long-term interests of the business and can lead to would-be successors becoming increasingly disillusioned with the leadership.
If family members decide to no longer continue in the business or have not been sufficiently involved to have the skills to run the business, then your hopes of creating a legacy for your family may start to fall apart. Once again, the proper documents may help to save the day. The advantage of committing a plan to paper is that it provides a reference point for you and your intended successors. The program can be altered and fleshed out as time goes on, but if it is not documented and reviewed regularly with your independent advisers, you may find that you don’t get around to succession planning until it is too late. Once again, documents will save the day.
With proper planning, advice taken and received, and forward-thinking, and by bringing the third generation into earlier positions of responsibility, the situation could have been avoided, assets utilised, and the business continued in a different and refreshed form.