Blog Search

Creating a Succession Plan for your Family Business

Creating a Succession Plan for your Family Business

The statistics are terrifying. A mere 28% of family businesses, across the globe, successfully move from founder to next generation, and only 4.8% make it to the third generation. How do you ensure that the momentum, built by the first generation, continues when the second one takes over? On The Money Show with Bruce Whitfield, Pavlo Phitidis outlines the fundamental principles of creating a succession plan for your family business:


Creating a succession plan

Many family businesses don’t create a definitive succession plan, and rather rely upon the assumption that future generations will be willing, capable, and equipped, to take over from the founders. Creating a succession plan should include a series of deliberate choices, and not just assumptions. Passing the baton in a family business shouldn’t be an afterthought. Whether your primary objective is to sell the business, or pass it on to the next generation, a succession plan is essential, and shouldn’t just be assumed. Putting pressure on the next generation to take over the family business isn’t a solution for ensuring the success of your business in the long term. Careful analysis of your children’s abilities and interests, matched with the business environment within which you operate, should be undertaken.

The age gap

When a larger age gap exists between founding and succeeding generations in your family business, it can be difficult to find a way forward for the business. With an age gap of 30 years or more between founders and successors, there can be serious problems. The son or daughter who enters the family business at that stage is, very often, just starting out in their career, eager to impress, and confident enough to take risks. On the other hand, the founders are looking forward to retirement, eager to secure their business’ future, and less likely to be supportive of taking business risks. Similarly, founders may find it difficult to let go of their control of their business, leaving the succeeding generation unable to truly manage and grow the business. This can have a significantly negative impact on family relationships too, leading to a breakdown in both business and home life. A smaller age gap between founder and successor will lay the groundwork for a fundamentally different succession approach, because a somewhat younger founder is more likely to be progressive, keen to take business risks, and has more time on their hands to build successors to effectively replace them.

Relationships

Creating a succession plan for your business must cater for the integral relationships that form part of your business. Family bonds can intimidate staff who have been part of your team for a long time, and similarly intimidate newcomers to the business. Through your succession planning, ensure that control and discipline is exercised around relationships with staff, customers, suppliers, funders, and investors. Most importantly, consistent application of the principles and founding values of your company must continue.

A method for creating a succession plan

No matter the age gap between founder and successor, appointing interim professional management will help to ensure that your business continues to grow, no matter how successful the succession plan turns out to be. While they may end up playing a mediatory role between founder and successor, they’ll retain a focus on building and maintaining your business. It’s especially important when a larger age gap exists between founder and successor, as this will help to ensure the sustainability of your business. When a smaller age gap exists between founder and successor, your interim manager will help to grow and build the business, while your successor grows in skills and experience.

Creating a succession plan for your family business is essential. Let Aurik help, and we’ll help you build your family business into an asset of value.

Tags: Succession, Business Succession, Succession planning

Three sales propositions to speed up deals in a tough economy

Three sales propositions to speed up deals in a tough economy

In today's tough economic environment it is taking longer and longer to close deals. To speed up this process, you need three...

Read more

Start with the end in mind

Start with the end in mind

Plans don’t always work out – that’s life. Starting a business is no different, especially when you need to work closely...

Read more

Negotiating the family business deal

Negotiating the family business deal

76% of family businesses don't survive through a second generation. It's a scary statistic and one that affects many private...

Read more

Building a pricing strategy to grow your business

Building a pricing strategy to grow your business

“The pricing game is emotional”… this is how a tweet from a listener began, and he’s right. A challenge to your pricing feels...

Read more

NEXT-LEVEL GROWTH: WHAT IT IS & HOW TO GET IT RIGHT

NEXT-LEVEL GROWTH: WHAT IT IS & HOW TO GET IT RIGHT

How often have you heard the terms "Next-level growth" or "Getting to the next level" bandied about? It's become more business...

Read more

Our past determines our approach to the SA economy

Our past determines our approach to the SA economy

Carl Jung said “We are trapped by the images of our past”. Meaning that our past experiences affect our perception of reality....

Read more

White Knights, Silver Bullets & False Prophets

White Knights, Silver Bullets & False Prophets

The exhaustion of running a business can make us vulnerable to the allure of a cure-all solution. But if it sounds too good...

Read more

Help Pavlo to #NameTheBook
namethebook

Help Pavlo to #NameTheBook

Pavlo Phitidis has just completed a book about the ideas, thoughts and more valuably, his direct experience in building successful...

Read more

How to build a retail empire very, very slowly

How to build a retail empire very, very slowly

Retail is notoriously difficult, but if you have a great product targeting consumers - you need to get it right. Pavlo Phitidis...

Read more

Immigrating talent for a quick but enduring economic boom

Immigrating talent for a quick but enduring economic boom

If we can attract 100 000 STEM qualified immigrants, we can not only bridge the skills gap that is stagnating our growth,...

Read more

EMIGRATION: Its cost and opportunity to a business owner
Business Growth

EMIGRATION: Its cost and opportunity to a business owner

Over the last month, I have had two same, but different meetings with two different business owners. They were the same because...

Read more

Creating opportunities that didn’t exist before
Growing business value Business Growth

Creating opportunities that didn’t exist before

Creating economy is a key entrepreneurial skill. Its something that is entirely possible irrespective of the environment...

Read more

Why waiting to act becomes the only act and how to ‘snap’ the bad habit
Asset of Value

Why waiting to act becomes the only act and how to ‘snap’ the bad habit

With the South African elections now come and gone, it feels like we have passed a milestone that we were all holding our...

Read more

Winning mindsets turning thought into action and action into results
Building your Business Business Growth

Winning mindsets turning thought into action and action into results

The distinguishing feature between business owners who crack it and those who drift along, and fail… is mindset.

Read more

How to structure the offer of a Management Buy Out
Business Succession Succession planning

How to structure the offer of a Management Buy Out

A hardworking, smart professional presented me with a scenario on an offer she had received to conclude a management buy-out. She...

Read more

Position your business for success and maximum impact
Positioning your Business Business Growth

Position your business for success and maximum impact

Wing Chun Kung Fu, a style of martial arts, requires that you have a secure footing on the ground in all its defensive and...

Read more

Building a business is like sailing a ship
Asset of Value Building your Business

Building a business is like sailing a ship

Analogies are very useful to simplify thinking and action. As a #businessowner, building a #business in a challenging environment...

Read more

What’s your business worth?
Business Growth

What’s your business worth?

Firstly, this only matters for 5.4% of all #businessowners since 94.6% of all business started fail to sell. They close at...

Read more

Creating wealth through your business
Business Growth Wealth Creation

Creating wealth through your business

Wealth describes an abundance of a desirable thing. It could be friendship, love, money, access to a foodstuff and so on....

Read more

Developing an effective marketing strategy
Business Growth Marketing strategy

Developing an effective marketing strategy

If you can’t and don’t get potential customers to know that you exist, they don’t care and you die. They don’t care because...

Read more

Build resilience into your business to take control of your future
Business Growth Strategic Planning

Build resilience into your business to take control of your future

We often hear about being resilient to thrive and survive in business today. Why does this matter and what does it mean?

Read more

Escaping the project revenue trap and why you should do it
Building your Business

Escaping the project revenue trap and why you should do it

Recently, at an Asset of Value event in Johannesburg, South Africa, a room bristling with 58 business owners that collectively...

Read more

What is your business building approach to 2019: Chose one of 3 strategies
The Money Show Business Strategy

What is your business building approach to 2019: Chose one of 3 strategies

2018 has been an exhausting year. Taking time off is important, so long as you don’t break the momentum of your business....

Read more

How to Deal with Nightmare Partnerships, Collaborations & Joint Ventures
The Money Show

How to Deal with Nightmare Partnerships, Collaborations & Joint Ventures

Collaboration is a key element for building your business into a successful Asset of Value. But, not every joint venture...

Read more