6 steps to protect the future of family business
To ensure continuity, a succession plan is absolutely essential for every family business. And this is regardless of whether the family runs a global empire, family farm or corner store.
History shows that succession is the Achilles Heel of the family business. An international study on family-owned enterprises by PWC found that only 24% of Australian business owners were planning to pass their business onto the next generation. 38% plan to sell or float*.
Regardless of your intention, here are six steps to help ensure that your succession is a success:
Formal family meetings
(or board meetings) should be held regularly. There must be a defined business agenda and open discussions encouraged to ensure no breakdown of communication between all of the family members involved in the business. Christmas lunch doesn’t count!
Plan for the exit of the older generation
by setting dates and establishing retirement funds to ensure that they are well provided for, including any transition periods. If you fail to have the total support of the older generation they are unlikely to relinquish their position.
Who replaces the older generation
at the helm of the family business is a vital issue because in order for the business to succeed it may not always be appropriate for the eldest child to automatically take the lead (whether he or she expects to or not!). There must be full and frank discussions on this issue and firm decisions made.
Seek professional advice
It is crucial that all-important planning issues are discussed with your Enrizen advisors; accountant, solicitor and financial planner. This will help them to be enforceable when the time comes.
Dates for future meetings must be set
so that discussions continue until a plan that provides for all family members in the business has been completed.
It is imperative that you keep your plan current
Succession plans require periodic revision and updating to ensure that what you have agreed upon remains relevant and executable.
The simple and common sense approach of preparing in advance, seeking professional advice supported by sound, unemotional management, will set the future of the business in good stead.
It can sometimes be hard to separate the emotions out of family business, so your Enrizen advisory team is available to help you mediate.