Corporate finance manager, Ryan Bilsborough, explains the key things you should be thinking about when navigating the smooth succession of a family business…
Succession planning is one of the key challenges facing businesses of all shapes and sizes. For many, the ideal situation is to pass the company on to family members – especially if new generations have come in and helped shape its success. However, this can be fraught with potential issues and the consequences of not getting it right can lead to major repercussions, including a loss of direction, brand damage, financial instability, operational disruption, devaluation and family breakdowns.
In my experience, the single most important thing is to begin succession planning well in advance as that tends to ensure a smooth transition. There should always be a clear plan that outlines roles, responsibilities and timelines, leaving no doubt in anyone’s mind. This should be a collaborative and transparent process involving all relevant family members and the senior leadership team. I can’t stress enough that absolute transparency is essential to make sure there’s universal buy in. If that doesn’t happen, you risk resentment, infighting and push back which could derail everything.
Also, be honest – especially when it comes to identifying potential leaders of the future. Work together to really assess the skills and potential of family members. This can be challenging but the suitable successor (or successors) needs to be capable, talented and enjoy the confidence of all involved, including the wider employee and stakeholder community.
Once the decision has been made and agreed, leadership and ongoing development training should be offered. Just because someone is good at that they do now, doesn’t mean they’ll seamlessly fall into leadership. This support and training should be tailored specifically to them and whatever sector the company operates in. Finally, set clear performance metrics for the new leadership to meet, and create a contingency plan as unexpected events can sometimes happen.
I’d also always recommend that you seek external advice throughout the process. Corporate financiers, legal experts and business consultants can add a huge amount of value and impartiality. Having experienced advisers on your side can make all the difference. They can, of course, act as sounding boards but their experience and knowledge will help you navigate the various decisions and make you aware of what will follow.
If things aren’t working out post-succession, there are some key steps to follow:
- Assess the situation: conduct a thorough assessment to identify where you are, what the problem is and what you can do to solve it
- Be honest: encourage open but respectful dialogue to address concerns as that will help find solutions
- Consider bringing in external or temporary non-family management: they may be able to provide stability and expertise
- Offer additional training: further training and mentoring may help the successor improve their skills over the long-term
- Realign roles: realigning roles and responsibilities that better match the strengths and weaknesses of the successor often works
- Review and adjust the plan: don’t be scared to review the succession plan and adjust as necessary. This isn’t personal; it’s about the company thriving
Get in touch
If you are thinking about next steps for your family business, or would like to discuss your exit plan with a corporate finance specialist, get in touch with Ryan for confidential chat at a time which suits you (including evenings or weekends) by clicking the button below.
