Don’t Let Your Legacy Fall: Don’t Ignore the Importance of Family Business Succession Planning * Incedo Group

Don’t Let Your Legacy Fall: Don’t Ignore the Importance of Family Business Succession Planning

Family business succession planning may not be very popular, but it’s certainly picking up the pace. Mom and pop businesses are thriving and it’s slowly gaining recognition as a source of economic growth in the country. In fact, over 50% of the country’s gross domestic product comes from family businesses. Likewise, around 35% of Fortune 500 companies are controlled by the families who created them.

Unfortunately, not every family business survives the transition from first generation to second-generation owners. According to a survey by PWC, only 52% of existing family businesses owners is confident that the next generation owners can run the business on their own. Because of this, they now recognize the importance of family business succession planning.

What is a Succession Plan?

A succession plan is created to identify who will continue managing the business when its current management team retires. In family business succession planning, the founders are usually replaced by their children, or in some cases, the child who was groomed to take over the business.

The Importance of Succession Plans with Family Business

Because family businesses have close histories and complex structures, both in the management and production side, outsiders may find it hard to understand how it works. Interfamily disputes, as well as estate and inheritance issues may also hinder the successful transition of a family business.

Family dynamics may also work against business’ successful continuity, but with the proper planning, most problems can be prevented.

The Secret Sauce of Successful Family Business Succession Planning

List the Business’s Goals and Objectives

The first and second-generation owners should create a collaborated vision for the business.

Family business succession planning process starts with pinpointing the goals and objectives of the business in question.

Make the Decision-Making Process

Ensure that the succession plan is relayed to everyone concerned. Write down the whole process to make sure that everything it documented. Remember, each person is different so the interest and ideas of one family member may be different from the other. To prevent factions, you must create a solid dispute resolution method that can fairly address these problems in the quickest way possible.

Build the Succession Plan

With all the goals and objectives, plan how the business would get there. Identify the successors, support-roles, and non-active roles for each family member. Don’t forget to identify the support or consultancy role that may be given to retired family members or previous generation owners.

Create an Estate Plan for the Business and the Owners

Address potential taxation problems for the business, including transfers upon death, divorce, or sale.

Develop a Transition Plan

There are various options to transfer the business. Owners may gift or bequeath, or may sell it straight to their successors. Create a timeline for the transition plan, so that the next-generation owners will have time to prepare themselves for their new role.

With the proper family business succession planning, a company’s life may be extended to last 10, and even 50 years. Implementing these steps will preserve the legacy of your family business.