Indicators of Succession Viability
Our first article in the Family Business Succession Planning Series covered the preparations necessary to begin the succession process. In this article, we’re going to present the key points you need to address to determine whether the family transition will be successful.
In this self-assessment of viability, there are seventeen items on the checklist. We’re going to cover the first eight today and the final nine in the next article. Your probability of a successful transition will increase as you address and resolve the questions.
1. Is it important to you that the business stay in the family? If it is, then you have a desire to Create a Legacy.
2. Is it clear to you when the process should begin? When should the next-generation leaders and owners be in place? Do you have a plan for communication to the next generation? If not, you will need to work on your Timing.
3. As an owner (and a parent), you may not feel comfortable with some of the issues with the next generation. Are you doing anything to increase your Comfort Level?
4. Do you feel comfortable that you are aware of all the of Options? You and the next generation need to know your options. Where to get the relevant information to make good business decisions is critical.
5. You must ensure that you are not making decisions based on assumption; but, rather on information expressed by those affected by the succession process. Just because they are your children does not mean you know everything they will say, or do. Communication is often considered the most important aspect of a successful transition.
6. Have you shared your Expectations with your family on their future roles in the business? It may be in your head, but you need to get it down on paper, and talk to your family.
7. You will need agreement on certain fundamentals about managing the business. These Guiding Principles will steer the process and help manage family members’ expectations. An example of these principles could include employment, ownership, compensation, and leadership.
8. Have you identified the Successor(s)? Have you communicated your selection to the next generation? Would the next generation have chosen the same individual(s)? How do you know? Don’t look at this selection just from your perspective. You don’t want to set someone up to fail.