Succession Planning: Family Business Assessment Checklist

Family Business Assessment Checklist

Business issues 

  Yes No
Have written goals for sales and profits been set?    
Do we have a business plan?    
Do we have a strategic plan?    
Do we have formal (in writing) policies and procedures?    
Is the business in good financial standing?    
Do we have an operating budget?    
Do we have a compensation and incentive program?    
Do we have a performance appraisal system?    
Do we have a board of directors?    
Can we attract and retain non-family managers?    
Is the business in a highly competitive industry?    
Are we experiencing an increase in sales?    


Family business issues    


Do family members know they are welcome to join the firm?    
Do we have policies for entry into and exit from the firm?    
Is a system in place to train and develop the successor?    
Do we have a succession plan?    
Can family members in the firm effectively communicate?    
Do we have a system to resolve conflicts?    
Are women welcomed in the business?    
Is there a minimum amount of sibling rivalry in the firm?    
Is there a system in place for choosing a successor?    
Does the family agree on goals for the business?    


If you answered no to any item action should be outlined and implemented to address and set policies for that item.

Succession Planning : Managing a Family Business (Part 3)

Succession Planning : Managing a Family Business (Part 3)

q  Do you use job descriptions for your key personnel?

 When you and your key personnel write descriptions for their jobs, you and they have a clear understanding of what is to be done and by whom. Such an understanding is essential in any small business. In addition, when, and if, a key person leaves, the job description is a helpful tool in recruiting and training a replacement.

 q  Do you periodically compare performance of key personnel with their job descriptions?

 Periodical comparison of performance helps your key personnel to be efficient. It also helps to pinpoint weak spots for you and them to work on for improvement.

 q  Do you provide opportunities for key personnel to grow?

Your aim should be to help key personnel stay alert to new and more efficient ways to do things. Conferences, seminars, and workshops which trade associations and agencies sponsor can help key personnel to grow in their management skills and outlook. Rotating job assignments is a way to make key personnel aware of the problems that their counterparts face. Include in your budget an amount that can be spent during the year for personnel training and education.

 q  Do you face the issue when key personnel stop growing?

Some owner-managers try to avoid the unpleasant task of facing the fact that a key person has stopped growing. It may be the result of not matching personnel and the job. If there is little or nothing you can do about such a mismatch, face it and don’t waste time trying to do the impossible. On the other hand outside problems may be crowding in on the key person. Once you know why he or she stopped growing, you can determine what needs to be done. In some cases, additional training is the answer. In other cases, the motivation that results from broadened job responsibilities resolves the problem.

 q  Are there policies and plans for motivating employees?

 Working through others is but no means an easy task. First of all, people are not puppets that can be moved by strings. Life may be a stage, as the poet said, but most people in small business are reluctant to submit to directors. Look for ways – good communications, respect for their viewpoint, incentive pay, and so on – to encourage people to want to do what you need them to do as employees in your company.

 q  Do you have adequate employee benefit plans?

 This includes life and health insurance, major medical, and pension. Benefit plans often are necessary to meet competition for skilled employees. Substantial plans can help to hold non-family key individuals in a family-owned business.

 q  Do you have key personnel insurance on yourself and is your family protected against your untimely passing?

 If these precautions are not taken, your death could result in the rapid dissolution of the business.

 q  Is there lack of communication among key personnel?

 The routine passing of information among you and your key personnel may be all that you want it to be. But what about disagreement? Do key personnel refrain from expressing disagreement with you? Good communications should provide a forum for exchanging ideas and for airing differences of opinion. Possibly an early morning meeting once a week among you and your key personnel would provide a forum for exchanging ideas.

 q  Does your record keeping system present a realistic picture of your business?

q  Is this the same type of record keeping system that other companies in your industry commonly use?

 Appropriate records should give the owner/manager answers to questions such as:

            Is there sufficient cash to operate the business?

            To pay back the bank?

            To pay taxes?

            Is too much capital tied up in inventory?

            Are accounts receivables being collected promptly?


Corporate records, if your company is a corporation, should be up-to-date including corporate minutes and record books. In checking out your record keeping, keep in mind that a poor system can result in excessive and meaningless information.

 q  Do you seek legal and financial advice on major transactions?

 The fine print in contracts causes trouble for some small business owners. They did not realize until it was too late what they had agreed to do. Legal and financial advice at the appropriate time can help the owner-manager to comprehend the full scope of your company’s contractual obligations and allow you to make decisions based on facts rather than assumptions. Whenever possible use your standardized contract in making contractual obligations.

Succession Planning Part 22: Managing A Family Business (Part 2)

 Succession Planning Part 22: Managing A Family Business (Part 2)

This is the second of a 4 part checklist for managing a family business.

q  Do you test or check the reality of your goals and plans with others?

 Outside advisors may spot “bugs” that you and your people did not catch in the press of working through the details of goal setting, budgeting, and planning.

 q  Are operations reviewed on a regular basis with the objective of reducing costs?

 Costs must be kept in line for a profitable operation. Review operations periodically such as weekly or monthly, to insure that overtime is not excessive, for example. And what about quality product acceptance by customers? Costs may be excessive because of obsolete methods or machinery that has seen its best days. And what about plant layout or materials flow? Can changes be made that will save time and materials? Determine the frequency of your reviews for the various types of operations and place a tickler on your calendar to remind you of these review dates.

 q  Are products reviewed regularly with the objective of improving them?

 Products that your customers benefit from are the keys to repeat sales. A regular review of your products helps to keep them up to the expectation of customers. Feedback from customers can be useful here. To reduce costs sometimes a product can be modified without sacrificing use and quality. If product obsolescence is a hazard, what plans are being made to substitute new products, as existing ones become obsolete?

 q  Do you ask outside advisors for their opinion and suggestions on products and operation procedures?

 Outside persons can help you see the facts about your products and operating procedures. They can provide a fresh viewpoint – the viewpoint of persons who are not so involved in the products and operations as you and your key personnel. The suggestions and counsel from a local management consultant may provide benefits far in excess of his or her cost. In this area some small companies set up a board of directors to satisfy the law concerning small corporations. But that is the end of it. Members of the board are not used for their knowledge and skill in business. They can make valuable contributions and the owner/manager should use all possible opportunities for getting such concerned opinions about the various phases of the company.

 q  Are marketing and distribution policies and procedures reviewed periodically?

 The best made product in the world can run into trouble if marketing and distribution policies and procedures are not right for it. Periodical checks can help you to be aware of changes that may be taking place in the channels through which you distribute. One approach is to check your competition; does it seem to be changing channels and policies? Can you still meet the requirements of your customers by using your traditional channels of distribution?

 q  Are there periodic reviews of profit and loss statements and other financial reports?

 In these reviews you can compare your operating ratios to those for your industry. It is also helpful to review your cash flow projections to see what, if any, changes are needed in your financial planning.

 q  Do you have an organization chart?

 You may need only a simple organization chart to show accountability and to establish a chain of command. In a family business, accountability and chain of command should be spelled out so that the one who is the chief executive of the company has the “mandate” he or she needs for managing.