Top 10 Tips for Family Business Succession Planning

Family business succession is a crucial part of passing the responsibilities to the younger generation while avoiding decrease in revenue resulting from losing clients, ineffective new management styles and defective cash flow structuring. On this matter, it is a must to follow 10 important things that we enumerated in the top 10 tips for family business succession planning.

Check out the important tips that made our list.

For the soon-to-be predecessor:

1. Identify your successor.

It’s the most obvious and most important entry in the top 10 tips for family business succession planning. Unfortunately, many business owners still miss the point. It is not enough for you to designate a COO (as in “Child of the Owner”) as your successor. You need to ensure that all the right qualities are seen in your successor and he/she is 100% ready for bigger responsibilities and challenges ahead. If you think your son or family member is not ready, have someone do the actual management for a while, while your permanent successor takes only the title concurrent to training.

2. Appreciate your workers.

Great bosses have great workers and designation is always important in establishing bond between the upper and lower arms of the business. Designating the business management is inevitable and while some of your employees may not welcome the idea, it is still going to happen sooner or later. To keep getting their support for the new management, acknowledge their contributions and assure them that all the changes, if there are some, are for the good of the business and the workers.

3. Have everything legally settled.

This will not happen without trust. All paper works should be finished before the official succession to avoid confusion and suspicion among your partners, investors and clients. You do not want others to see the succession as a just-for-show thing as this will lead to distrust. This tip regarding legal matter is just worthy to be part of our top 10 tips for family business succession planning.

4. Talk with your family.

Many siblings may want to take over the top position as it is also tantamount to power, and most likely, money. Misunderstandings within families are normal, but if this will cause the downfall of your business, then it demands urgent attention and solution.

5. Succession doesn't mean end of responsibilities.

Retirees deserve a big break and a grand vacation after the years of keeping the family business thriving. After all, they are working for a better life. However, taking a permanent break from management does not necessarily mean cutting the connection. The insights of experienced businessmen are priceless. They may come in handy should the need arise, so better keep the lines open.

6. Start Early.

It is inevitable to have a family business succession. It is better to start mentoring your kids about the business and introducing them to the industry you are in earlier than expected. Passion for business is not learned; it is developed through the years of exposure.

7. Know when to retire.

Retiring out of whim is no different from resigning without a new job. The future is vague and financial management is at the brink of falling apart. Do not be hasty and retire when there is a worthy successor.

For the soon-to-be successor:

8. Anticipate the challenges ahead.

In order to breeze into the transition period, one should be prepared to solve problems even before they come to reality. This is the trickiest tidbit among our top 10 tips for family business succession planning as it takes an experienced business owner-cum-manager to foresee the challenges in which the business is most vulnerable at.

9. Get professional help as necessary.

Among our top 10 tips for family business succession planning, this is the one that might receive more “boos” than “aha!” Not many families want third parties meddling with their family affairs, especially when it comes to money. But remember that the risk is higher in having an inexperienced business head steer the company than having third party consultants and advisers share their business acumen with you.

10.  Do no emulate the old management.

Many successors believe at first that emulating how their predecessors managed the business will keep the profit coming and the management-employee relationship working. It succeeds sometimes. But they forget that no two persons are alike and albeit the fact that styles can be copied, decisions and problems will always vary. Instead of trying hard to be someone else, just be natural and learn as much as you can in running the business. These top 10 tips for family business succession planning aim at bringing out the best in you and not bring out a world-class copycat out of you.