MEMBER ADVICE: Is succession planning a financial or emotional journey?
Family Business Place members (and mother-daughter duo), Tracey and Sophie Reddings, share their advice on planning for the day your family business changes leadership from one generation, to the next.
If planning your professional future currently seems difficult, organising succession for your family business can feel close to impossible.
Because - without pre-planning and support - it is.
Succession planning involves a mix of financial and emotive challenges, making it a tough task for any business. And we should know, as a mother and daughter team we’ve spent the last 18 months enacting it ourselves.
While we have had plenty of experience supporting clients with their planning, we knew it was essential to get outside support. This was especially important when it came to validating and agreeing the internal handover between the both of us.
While each family-owned business is different, we got the following insights from our own planning.
Beginning early allows you to give succession the attention it needs. The process can involve difficult conversations around challenging personal and professional issues. Giving enough time to understand these issues in full and plan around them will always be a huge benefit to the process.
Any business review reveals weaknesses with your professional situation. Use this as an opportunity to address them. This can involve putting business trusts or shareholder agreements in place.
Seek out professional guidance for the process. This allows for a degree of scrutiny and professional expertise that you may not have in your organisations. While we have professional experience dealing with the process, we outsourced to help obtain additional clarity, and to save time and effort.
Focus on Equality
Sometimes the best solution involves breaking with tradition. Patriarchal or outdated attitudes are damaging to long-term business health. Consider all options during your process and use this as an opportunity to review and understand if individuals are professionally and personally up to the job.
Review Your Roles
Succession is a fantastic opportunity to understand and define the professional responsibilities throughout your business. This helps separate ‘management’ from ‘ownership’, protects against dependencies, and ensures that key learning processes are in place for future hires or promotions.
Be Emotionally Ready
Take time to confirm that you are actually ready to transfer responsibility and that your business is financially stable. Rushing your succession approach often leaves damaging, long-term ties to the business, such as the need to draw income to fund your retirement.
Ultimately, it should come as no surprise that any succession plan involves tackling a combination of financial considerations and emotional challenges. One cannot be had without the other.
Speaking as a founder, it becomes essential to ask if you are ready - financially and emotionally. Any quality succession process should make sure the next generation is ready and prepared. And also ensure that those leaving the business enjoy a financial future that is ring fenced and safe.
One of our most surprising discoveries was how important, and genuinely helpful, a smooth handover was for both of us. Completing our succession planning helped build confidence in the future handover and addressed personal concerns. In particular, both of us found massive benefit in the process – especially during a time that has been disruptive in the extreme for family-run businesses of all sizes.
And while no outcome is ever fully guaranteed, the process is always fair, transparent, and fully legal.
Inheriting a family business carries immense emotional weight and significant professional responsibility. Succession planning makes sure that the person you pick has every possible tool to make the best start possible and achieve your established potential.
So, no matter whether you’re ready to begin planning, discuss difficult elements, or more; be sure to start the conversation today.