Succession planning for family owned businesses all too often is a taboo subject within the family that owns and runs them.
It is certainly not untypical to hear that the more senior members of the family feel that the next generation, who may be middle aged, are not yet ready to take over the reins.
The antithesis is perhaps that the senior generation really don’t want to let go, with the business being both their life and livelihood – a situation that is exacerbated often by the lack of retirement plans. Whilst the family members who are engaged in a business will often talk about and discuss day to day matters, few will take the time to face the issues over the future and succession.
In previous generations not facing up to or dealing with succession may have been less consequential.
However, with an ever changing world impacting on the viability of businesses and the growing need to financially provide for family members living longer in retirement, there is perhaps a greater need than ever to look to the future and consider succession sooner.
For most, succession is likely to involve one generation taking over from the other – a process which is fine if the next generation is willing and capable of doing so. A passion for the business and an appreciation of the family values are often a prerequisite. A lack of business skills and attributes may give rise to the need to receive support and guidance.
Certainly experience shows that more and more members of family businesses are benefiting from working in other organisations prior to returning to take up roles in their own business. Many are also benefiting from participating in formal business education or support from a business mentor.
In the event that there isn’t a family member to take on the business, with alternative employment or other interests being of greater attraction, then an option may be to retain ownership of the business as a family, with the appointment of a general manager or managing director. Such an approach will require careful recruitment for this role with the need to balance commerciality with family business values.
Perhaps the last resort for many family businesses would be to consider sale, not least as it could be like selling the family silver, or create a sense of loss. For some however, it might be the best route, especially if the sale is planned well in advance to ensure the best financial return and to manage the family’s reputation and standing.
Whichever option is taken, successful succession requires family members to have open dialogue, to plan for the future and to ensure that the plan is followed through. Undoubtedly this process is likely to benefit from the involvement of the business’ wider advisers be they accountants, lawyers and bankers of other business acquaintances. Succession for family businesses will then hopefully become an everyday conversation.