Succession planning is a fundamental part of owning and running a business. Someone will always need to stand at the helm, and the more concrete your plans are for the moment of transition, the more protected the business is against disruption.
There are many different ways to exit a small business, ranging from the extreme (say, company closure and insolvency) to measures that allow for continuity, like succession. Succession can involve a key member of your team – someone from upper management who you feel has the insight, wisdom, practical expertise and passion to lead the business into a new era.
But succession can also be more personal – a matter of keeping the business in the family and letting it pass on to the next generation as a matter of tradition. Remember that the needs of any business are unique, so you’ll want to discuss your options with your corporate solicitor before you make any conclusions.
Passing the business onto a family member has many advantages and disadvantages. Here’s what you need to know.
There are some obvious benefits to keeping a business within the family. It generally means that the company can continue the same way it has always operated, without any major changes that can cause loyal customers and staff to jump ship.
If your family member has been raised with plenty of exposure to the business, how it operates, and the ways in which you steer it forward, then it’s quite likely that they’ll have absorbed a lot of that nous and passion over the years, which can be the key to the business’s success.
Family businesses enjoy a strong sense of stability, constancy, and authenticity – three values that align with customers’ own values. This is often down to long-term outlook and the ability to pass those core values through each generation of leaders.
Perhaps the biggest con to replacing yourself with a member of your family is the whiff of nepotism it can bring about, which can alienate your existing workforce. There are plenty of situations where this needn’t be the case – say, where a son or daughter has been gradually working their way through the ranks of the business and really does have that knowledge and expertise essential to strong leadership. But, if your employees are led to believe that the decision has been made based on your heart rather than your head, things can easily start to turn sour.
What’s more, the plan to pass ownership onto the next generation will only work if the person you have in mind has the passion and commitment the business requires from its leader. A great opportunity, given under the wrong circumstances, will be treated like a bad opportunity.
Plenty of businesses thrive under many generations of the same family, but plenty find themselves floundering, too. You’ll want to be honest with yourself about the strengths and weaknesses of the person you have in mind and avoid letting the idea sweep you off your feet.