When you’re trying to decide who will take over the family business, there are many factors to take into account. Often, you have choices between various family members and employees, and it’s important to make the right choice for your family business succession.
Family businesses are very important to the American economy, but transitions are difficult. Family businesses generate over 50% of the U.S. Gross National Product (GNP), but less than 33% survive the transition from first generation ownership to the second.
To make sure your company doesn’t become a failure statistic, it’s vital to plan and make the right choices for ownership and leadership in your family business succession.
Family or Employee?
As you create your succession plan, it can be difficult to choose between family or an employee to lead your company into the future, especially when you have an employee with a great business mind who has more experience than your family members. When setting up a plan for family business succession, you need criteria for the successor that reflects the needs your company will have in the future. Resist the temptation to pick a clone of yourself who will do what you did. Instead, choose someone who can take the business to new heights.
If you’re choosing between several people, you can ask your board or directors or other trusted advisors for a recommendation. Their opinions can help you overcome personal biases and get a more objective opinion.
Evaluating Skills and Experience
What skills and experience does your successor need to manage the family business? Some abilities to look for may include:
- Vision for the company’s future
- Leadership skills
- Excellent communication
- The ability to manage and develop others
- A clear understanding of finance and accounting
- Strategic business planning abilities
While a leader can hire people who specialize in things like technology, marketing, and sales, it’s still important that your successor has a general understanding of these areas as well. They should also know what gaps exist in the staff and have a plan to fill those gaps.
In order for your family business succession to be successful, your employees must know and respect the new leader. Has your planned successor been in your business for a long time? Have they developed good relationships at every level of the organization?
Your successor must also be professional. Someone who uses power and influence selfishly or for personal gain will not be a good future leader for your organization. Instead, they should have the good of the business and employees at heart.
That doesn’t mean your successor must lead like you do. They may choose a more casual open-door style, and you may have had a more formal approach. Either way, however, professionalism in leadership is important.
Finally, a good successor will know how to delegate. When you have someone in mind who knows how to empower others and delegate responsibility and authority, it’s a great sign that you’re on the right track with succession.
Get Support with Your Family Business Succession Plan
Creating a family business succession plan is a challenge, and you shouldn’t feel the need to do it alone. Trusted advisors can give you great ideas, but sometimes you need an outside viewpoint to help you get an objective understanding of the situation.
I can help you with your family business succession plan. Whether you’re leaning toward choosing a family member or employee to take your business into the future, it’s important to have a third party take a deep dive into the details. Having someone alongside you can bring peace of mind as you make the transition.
In my next article, I’ll discuss the five keys to a successful transition. If you’d rather not wait, schedule your free consultation today. Let’s get your business ready for succession so that it will last for many generations to come.