Do you have a family business that you intend to pass onto the next generation in due course? More than half of the UK’s family businesses don’t have a succession plan in place – but this should be a top priority. Whether you want to hand over the reins so that you can retire, or to be prepared for all eventualities, now is always the best time to make provisions.
Compared to other types of enterprise, family businesses are a special case, and succession planning can be more complicated because of the relationships and emotions involved. Many small family run businesses don’t even bother with formal corporate governance codes and principles in the way that a listed companies would be required to do.
What’s more, the family bond can get in the way, stopping you from thinking too far ahead. Perhaps you simply cannot imagine anyone else taking over ‘your’ business, maybe there’s nobody obvious in the family to take the job or you fully expect there to be squabbles after you’ve gone.
While setting up a smooth transition between you and the future leaders is essential to safeguard the business, you would be well advised to watch out for the following pitfalls:
- Reluctance or refusal by the ‘old guard’ to give up control
- Hesitation by the new leader(s) to assume responsibility
- Competency vs loyalty – is the new family member really up to the job?
- Generation gap clashes over company direction and management style
- Trust and clear communications vs negative family dynamics
It’s clear that not putting an adequate succession plan into action can jeopardise the family firm’s future, so don’t leave it until the last minute before taking action. Succession planning can be a complex and drawn out process involving emotional, financial and other technical factors that all need to be given proper consideration.
If your family relationships have the potential to get in the way of good business decision making, engaging a neutral, third party for professional advice may be hugely beneficial. Not only can you trust your business planning partner to keep the company’s business accounts and tax affairs in meticulous order, he will act as a stabilising force to help steady the ship when the going gets rough and facilitate the process of working through all the issues.
If you wish to pass on your family business to the next generation, putting off business succession planning is one of the worst things you can do. A good succession plan will ensure that there are enough funds for you to retire on, and that the business you’ve built up has the best chance to continue to thrive in the hands of your successors.
Why not get in touch to talk about your succession plans, please get in touch.