Family businesses are the backbone of the UK economy. Accounting for over 88% of private companies in Britain and providing upwards of 13 million jobs. Family firms have shown they can be adaptable, entrepreneurial, innovative, and forward-thinking as many have shown generation after generation.
The ability to pass ownership of the business to the next generation is often viewed as the ultimate measure of success for a family business. The process of doing so however is not as easy as it may appear.
What is succession?
Succession is the process of transitioning the management, leadership, and ownership of the business. For such a simple explanation delivering and executing a succession plan is much more difficult. It’s a multi-layered and complex process, one of the biggest challenges family businesses faces.
It’s often the elephant in the room but it’s much better to address succession early on because when planning has started, and the conversations are ongoing it becomes less uncomfortable, and tension can easily be dispelled.
Succession can be broken down and dealt with in separate entities of management, ownership and leadership. Each aspect can be dealt with separately and contrary to popular belief one does not have to affect another i.e., transfer of management does not have to mean a transfer of ownership. Each transfer can happen independently of another which should make the process much more manageable.
From experience when discussing succession it can bring about hard questions to be asked and answered. We always advise that everyone enters any succession conversations with an open mind, leaving any prior assumptions about what people might be thinking or feeling at the door. While it is difficult succession is necessary
Why is succession important?
The family business might have been passed down from generation to generation or it might be something you have built from the ground up. Either way, it’s something you care about and while the idea of succession might be something you are struggling with succession is something the generations that come after you need to have.
So why do family businesses need a succession plan?
A succession plan provides a level of certainty for everyone involved in the business from family members to suppliers, employees, customers, and stakeholders. Without a plan in place, how can the next generation begin to develop and grow into their future roles as leaders and owners of the business? That is of course if that’s what they want as the next generation might not want to be involved in the management or leadership of the business.
A common misconception is that succession planning only impacts family members when in fact it impacts the business as a whole and that includes non-family employees. The succession plan you create will affect these employees so keeping them in the loop and allowing them to see that whoever steps into leadership, management and owner roles next will be well suited not only for the task but also for the challenges they might face. I’ve found that the best succession plans are years in the making, giving employees the necessary time to prepare for this transition. Keeping employees appraised of the situation can prevent discontent further down the line.
Having a succession plan will enable everyone an opportunity to say what they want and don’t want to provide clarity on the future of the business. Succession isn’t you ‘being put out to pasture’ it’s a great opportunity. Through succession, you can carefully plan the future of the business and establish a good positive culture around succession that guides generations to come on how to successfully work through future successions.
The key to successful succession planning for family businesses
There is no cheat code, or one size fits all solution when it comes to succession. It most likely will be a little uncomfortable and emotions are likely to be heightened. Emotional barriers to succession are very often overlooked but they underpin everything. There will be emotional feelings about the business from everyone involved in succession planning. From sadness to fear to disdain to anger, succession is an emotional vortex but that can be a positive thing.
The key to successful succession planning is honesty. It helps to start early, of course, the right time to start planning is now but that’s not the most important part, honesty is. We already know that the conversations are going to be heightened with emotions so honestly explain how you’re feeling. Honestly explain what you want, what you might fear, what you want to do and also what you don’t want to do and what you don’t want and allow everyone else to do the same. Creating an open safe space to have an honest conversation isn’t always easy alternatively, you can hire an intermediary to help guide conversations. Making honesty the focus of your succession plans will help to ensure the direction of travel suits everyone and can help to strengthen relationship ties.
Succession is more of a marathon than a sprint. It doesn’t have to be a negative subject. You should treat it like the great opportunity it can be to have an open and honest conversation with people that you share a common purpose with.
Our team have vast experience in dealing with a number of family business issues and would be happy to help you with your plans for succession.