A weak succession plan could be your demise – if you decide to hand the business over to the next generation, for example, by the time you realise they’re not fit to run the business, you may not have a business to salvage.
Just like any aspect of your family business, a failure to think critically about particular aspects could have disastrous effects on the longevity of your operation. Succession planning is no different.
It can be hard to think about what your business might look like after you have taken a step back. However, if you want to see your business prosper after you have handed it over, you need to have a well-crafted, well-communicated succession plan in place.
Unfortunately, a lot of small and family business owners have neglected this part of the business plan. It gets moved down the list as other seemingly more important tasks take priority.
Each day it gets ignored is one day closer to being caught red-handed, unprepared for the inevitable changing of the guard.
Why is having a succession plan important?
Firstly, and perhaps the one aspect many choose to not think about, what will the business look like if something happens that immediately prevented you to work, such a death or incapacitation. Unfortunately, there will always remain a slim possibility of an accident, one that prevents us from working and running the business how we want it to be run.
Without a succession plan in place, questions like who runs the business, who owns the assets, who makes the day-to-day decisions remain unanswered, leaving your employees to clean up the mess.
While that can be an extreme example, one that is far more prevalent in family business is that of expectation. It can be reassuring to know a son or daughter who is working in the business is keen and eager to take over one day, but the reality is that for some businesses, they mightn’t be the right person for job. A transparent succession plan will help manage those expectations.
What are the consequences if I don’t have a plan in place?
While the aforementioned consequences ring true, the ultimate consequence is far more confronting. A weak succession plan could see the demise of the business. If you decide to hand the business over to the next generation, for example, by the time you realise they were not fit to run the business, you may not have a business to salvage.
What can I do?
The good news is it’s not all doom and gloom and if you still have an operational business it’s not too late to put a plan in place.
The first thing to do is think about your exit strategy and what it might look like. Do you want the next generation to take the reins? Or perhaps they’re not the right people for the job so selling it to staff or competitors is the best option.
The sooner you start this conversation, the sooner any potential expectations can be measured and a solid plan is agreed.
Susan Rix AM, National Leader, Family Business, BDO