Here’s a sobering truth about family business: Only about 30% survive to the second generation (per the Family Business Institute in Raleigh, NC). Think about that. Millions of people have a dream, put it into action, and achieve some level of success as entrepreneurs. And after a lifetime of hard work and sacrifice, seventy percent of business owners, whose signature accomplishment is the business they built from the ground up, will see the business cease to exist with their exit.
How gut-wrenching it must be for the founders to watch that happen! Your family business is almost like another child, and watching it wither away is excruciating. Just as painful as that quite often, when the family business goes down, it’s the founders’ children at the helm going down with it. Not only does your business sink, but your family’s financial security (and often, emotional health) goes down with it.
There is hope! When family businesses die, it’s not usually because of some unforeseeable evil that befell the company or family. It’s not simply a roll of the dice. It’s usually death by accidental suicide. It’s usually a failure to do the one thing that goes further towards ensuring a long-lasting business than anything else – succession planning. Business owners who begin succession planning early – ideally at least ten years before retirement – stand a much better chance of avoiding that fate.
So why don’t people do it? Why not do everything possible to avoid all that angst? There are a lot of reasons. It’s not always pleasant (there will be conflict!), it’s not legally required, it’s not easy, it’s not a direct revenue generator, etc. Whatever the reasons, they all pale next to the benefits of putting together a successful plan.
The list of things to consider in succession planning is long and complex. In fact that’s one of the reasons not enough people do it. It’s a little overwhelming. Like anything else, though, the best way to tackle a big obstacle is to break it down into little obstacles. For a start, we’ll spend the next few posts discussing these six questions:
1) Who is the best candidate to succeed you?
2) What are you doing to prepare the next leader?
3) Does everybody know what’s going on?
4) What is the timetable?
5) What is your role after the transition takes place?
6) Are your estate-planning goals in line with the succession plan?
That’s not an all inclusive list, but it’s a start. Are you ready?