Succession planning is easier said than done. Among family-owned businesses succession planning conversations often happen too late, and lack necessary details and preparation in order to make it effective.
According to a survey by Alternative Board, 56% of family business owners are either unhappy with their current succession plan or don't have one at all!
On top of this staggering statistic, 62% of family business owners believe it’s very unlikely their business will remain family owned by the next generation.
Cultivating Character and Faith
Let’s take a look at very important qualities that are often ignored or overlooked during the succession planning process. Those critical qualities are character and faith.
“The greatest legacy one can pass on to one’s children and grandchildren is not money or other material things accumulated in one’s life, but rather a legacy of character and faith.” - Billy Graham
Billy Graham’s words speak to an important issue when building a family business that’s designed to remain in the family for generations. It speaks to the legacy family business owners create, whether on purpose or by chance.
Every family business leader should understand the power of becoming a character-based leader, one who focuses as much or more on integrity, trustworthiness, and faithful stewardship of the financial resources as he/she does on the revenue and financial growth of the business.
Character and values cannot be trained. They have to be talked about, modeled and lived out on a daily basis, one business decision at a time. Only then younger generations will truly understand not only the definition of character and integrity, but how to practically live those out in daily interactions with employees, vendors, clients and even competitors.
In 1 Chronicles chapter 29 we are told that everything in heavens and earth is God’s, that both riches and power come from Him alone, and that He is the one who makes men great and gives them strength.
As Christ following family business owners, we have an opportunity to build a legacy of stewardship, one that recognizes us as managers, and God as the rightful owner of the business. When future successors understand their role as faithful stewards of the business, the fruit of your business will eternal value.
Successful succession planning process includes open and honest conversations.
It’s not always easy to talk about issues related to family business, especially when family ties and emotions come into play. Here are few guiding principles on how to build a culture of honest and open conversations around succession planning:
Schedule regular time on your calendar for honest and open conversations
Make sure everyone understands that relationships always come first
Lead by example and be vulnerable
Invite and reward honest feedback
Become a good listener and hear your potential successors out
Be clear about the financial obligations and commitments future successors will be expected to meet
By engaging in an open and honest dialogue early on, you can understand your family member’s passions, desires and goals, and how those fit with the long-term plans for the business. Those honest conversations will give you the necessary insights in order to make wise decisions pertaining to the future management of your business.
Conversations and dialogue should happen with all family members, even those who may not be involved in day-to-day operations of the business. This will assure that all transition plans are clearly understood, and nothing is left up for interpretations.
Put in Down on Paper
Succession planning is a process that takes time, yet frequently we wait too long to begin.
Because many family-owned businesses start as a hobby, important legal matters like permits, licenses, loans, financial liabilities and obligations are often left unresolved, and become an issue for the remaining family members to solve.
When your succession plan is not down on paper, too much is left for personal interpretations. This can lead to family conflict and severed relationships.
Legally binding documents signed by all pertinent family member should be put in place to both protect the integrity of the business ,as well as family relationships and personal finances of directly involved family members.
How about Your Business?
There is much more we could say about successful family business succession planning, but if you follow these three key steps, you will:
Assure that values, character and faith are the greatest legacy you’ll leave to the next generation
Honor all family relationships in the succession process
Leave your family business in order and protect your family from conflict
So where are you in the business succession process? How can we help?