Succession Planning: Preparing Your Family Business for a Big Change

For thousands of years, family businesses have been created across the world and run from generation to generation. When the current owner became too old to continue overseeing the trade, they prepared their son, daughter, sibling, or family member to replace them. This is a practice that has happened for ages, but the practice isn’t without its share of potential pitfalls. 

Family-owned businesses create around 75% of all gross domestic product and typically see better returns and last longer as a business than other private companies. Continuing that success requires special oversight to train the next leader and prepare them for what’s to come. 

What is Succession Planning? 

Succession planning involves identifying and developing internal talent in the organization when it comes time to fill a leadership or ownership position in the future. The process ensures business continuity during and after the change while allowing the new individual to adequately prepare for the new role through skill assessment, training, development, coaching, and ultimately replacement. 

Creating a succession plan that works well takes time and resources. You have to plan around your employees, other leaders, industry movements, and business performance as you craft and implement your succession plan. The transitional process could take months or even years depending on the scope of the business, and you need to have a plan that accounts for future changes and potential roadblocks. 

Creating a Succession Plan Template

Normal succession plans are created and executed in hundreds of companies every day, each created with their specific role and needs in mind. When an important employee is planning to leave, leadership will draft a succession plan to onboard the replacement quickly and painlessly. Similarly, your family business will be creating a transitional process for your leadership that needs to cover a few key points to make it a successful template. 

Be a Proactive Planner

You don’t want to be caught flatfooted without a plan if it comes time to change your leadership or ownership suddenly. Emergencies or other unavoidable circumstances can happen at any time. You should consider what your current family head does across the board and create a contingency plan in case they are unavailable. 

These questions can be broad to cover all your bases, like: 

• What is their daily impact on X role or department?

• How would operations be affected if they left suddenly?

• Who would step in temporarily to handle their work?

• What is our long-term replacement plan?

Once you’ve created a list of questions and have the appropriate answers, you can move to the next step. 

Finding the Right Candidate

Family businesses have a unique leadership and ownership process than public companies. Oftentimes, when someone is planning to step down, you have to assess which members of the family are willing to take the role. This could be based on the choices or desires of the current head or from internal consensus, but you have to know in advance. If the selected parties aren’t willing to take on the role, you need a backup plan on finding the right talent to replace the open position. 

The obvious choice would be the next person on the organizational chart, like the president or vice president, but that may not be the case for a family business. If you are choosing a family member outside of the company, for instance, they will need more time to get comfortable with the setting and specialized training to bring them up to speed. If it’s someone already familiar with the business, they will still need coaching around their new duties and time to settle in. 

Notification and Development

Once you’ve determined the next candidate and ensured they are willing to take ownership or leadership of the business, you can notify the company to prepare everyone for the change. This gives other departments time to draft any relevant documentation to assist in bringing the new candidate up to speed while also providing time for the company to transition comfortably. Leadership changes don’t simply affect one person; you have to account for how this will impact everyone underneath them as well. 

Once everyone is notified, you can begin devoting more time to cultivating the new leaders skillset for the role. This should be a plan scheduled with their current skills in mind to give them more time to train in areas they lack. This training can be coaching or shadowing from the previous leader, specialized classes, or even trail runs. Whatever works best for them and the business is the ideal solution for you. 

Crafting Professional Succession Plans for Family Businesses

Once everything is in place, you can comfortably step back and allow the new leader or owner to thrive. Getting to this point takes time, dedication, and experience. Not every company has the tools to create a plan like this successfully the first time, which is where Family Business Consultants comes in. 

We provide experienced insights into succession planning for family businesses because we’ve experienced it firsthand and honed our craft for years. We help family businesses create customized succession plans to make the transition seamless and educational. If you’re planning your retirement or feel it’s time for the next generation to take the reins, contact Family Business Consultants today so you and your family business can confidently step into the future.