If Family Business owners wish for their business to pass on from generation to generation and keep their business within the family, preparation and training should start at birth. This requires a dedication and devotion of education, time and care, and it is important to be proactive with planning. However, according to the Family Business Survey, only 52 per cent of those planning to transition have someone in mind.
However, what’s more important, is to recognise that obligation is not a good enough reason to become a successor. It could be that the next generation’s skill and interest lies elsewhere, which then triggers the need to consider other exit or transition options. For example, a non-family CEO can be employed for a short or long term period, depending on the changing family dynamics, which could then afford the family some additional time to work out what or who is best as successor.
Following in your footsteps
There may be an expectation that successors must have the same skill set as their predecessors. However, it would be essential to consider that a business model is organic and evolving – if it is not growing, then it’s stalling. Therefore, it may be beneficial to consider a “disruptive successor”.
A disruptive successor will challenge the status quo, with the aim of keeping the business model relevant and current. As a result, this may lead to different ideas and innovations.
It would be naïve though, to not consider the feelings of the prior generation in accepting a disruptive successor. As such, this transition and new dynamic should be managed with care.
It may be helpful for the prior generation and successor, to agree on the core skills required of a business leader. This may help in bridging the gap between where the business has been, where it currently is and where it is heading. This can in turn build trust and alignment in the transition.
Leadership 101
A leader’s paramount responsibility is to generate clarity about: where the business is headed, why they are headed in that direction, and how each person can play part and contribute.
Therefore, a leader must:
- have a vision for the business to drive it forward;
- effectively communicate what is expected;
- organise required resources to allow success;
- help the team achieve their potential by working on their own leadership skills; and
- inspire the team to work together.
It’s about the Journey, not the Destination
Planning for Family Business succession should be seen as a journey – with a flexible end destination, and the overarching goal of the success of the business.
Think about brainstorming for a family holiday: the number of different opinions and interests to cater for are endless. Dad wants camping, mum wants a spa day and the kids want adventure parks. Then, in a few years’ time, all these ‘wants’ may change again!
With a melting pot of personalities and ever-changing interests, it is imperative to adopt a plan or policy to help manage this. Don’t forget – we are just talking about planning a family holiday here, so imagine when we it’s about the Family Business!
Be willing to change your timeframe and be adaptable – similar to a planned camping trip that gets rained out!
(Don’t) Keep it in the Family
Family policies are just as important as business policies, but they are more difficult to navigate due to the emotions involved. The Family Business Survey revealed 65 per cent of those with succession plans are confident they will transition the business to a family member, and 73 per cent believe the potential successor is prepared and ready to take over.
An outside adviser is essential for cutting through the emotions. The right adviser would facilitate discussions constructively by tackling the tough topics, clearing any misunderstandings, and keeping the family focused on the objectives rather than allowing the family to defer to less emotional business decisions.
This is how Grant Thornton can help. Succession remained a critical piece of our Family Business Survey conducted last year, with results highlighting that transition ready Family Businesses are more resilient and yield a better financial performance. We can help you achieve your succession goals, as well as highlighting those other compliance issues relating to taxation, retirement security and cashflow planning.
Contact our team of specialists today.
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