Succession Planning – Part 1
Introduction: Meeting the Challenges of Succession in the Family Firm
Start Looking at Succession Issues–Today!
Succession from one generation to another, or to qualified outside management, does not happen easily in the family-owned business (FOB). In this blog post ( Succession Planning – Part 1 ), we start a discussion on why succession planning is so hard and why it is so important.
If you are interested in the succession and continuity of your business, you must understand that planning for that continuity is the critical factor.
The failure to adequately address the topic of succession is the primary reason that only 30% of FOB’s continue into the second generation and that only 10% more continue into the third.
Succession exists as an underlying issue in all FOB’s, playing a tremendously important role in the life of the family, as well as the life of the business. Yet owners and operators of family businesses rarely address succession, apparently because of its powerful psychological implications, which can sometimes be overwhelming.
Admittedly Succession Is A Complicated Topic
Thinking about and dealing with succession can be extremely demanding, both emotionally and intellectually. When you begin to examine the concept of succession, you must deal with aging, mortality, control, and power, just for starters. In addition, the business issues that founders must simultaneously deal with include ownership, management, strategic planning, and replacing the professional relationships from one generation with the next generation.
These relationships include key non-family managers and advisors, clients, customers, suppliers, lawyers, accountants and bankers.
Succession Forces Business Owners to Make Hard Choices
When more than one member of the next generation is active in the management of the family firm, the senior members may feel they’re being forced to choose one child, for instance, over another. Most parents spend their lives trying to convince their kids that they are all loved equally, but in this situation, the founder and his or her spouse must make a decision that directly contradicts this message.