Family businesses have been around for ages, involving two or more family members who mainly run the show. It’s like the OG of business setups.
Think farms back in the day – family life and work life all tangled up. In cities, your friendly neighborhood shopkeeper or doctor lived where they worked, and family pitched in when needed.
Now, fast forward to today. Family-owned businesses are still a big deal. They’ve got this mix of history and adaptability. And guess what? We’re here to spill the beans on ‘Smooth Succession.’ Get ready for a simple roadmap and easy steps to make your family business transition a success.
Ryan Williams, Director of the Australian Centre for Business Growth
“One factor in a winning succession plan for a family-owned business is an independent valuation of the business. For many smaller family businesses during generational transitions, the value of the business is often what mum and dad want to retire with, rather than intrinsically what the business is worth. This can end up burdening the next generation with debt, even facing business failure down the line because they just can’t meet what’s required.
“Being clear on skill sets is also critical. You may have a child who’s very proficient in finance, but you come from a sales background. You need to prepare them to build out the other skills they need. This involves working across different areas of the business so they can learn the ropes.
“Lastly, it would be optimal to set a clear exit date – you can’t rule from the distance if you’re going to allow for succession. However, if you choose to remain as the majority shareholder, retaining indirect control while appointing your children as general managers, it would be important to pre-plan for that tension by intentionally separating business management apart from personal family conversations.”
Angie Barnard, Managing Director of Synergy Accountants
“Creating a successful succession plan for a family-owned business is not just about passing on assets; it’s about securing the legacy you’ve built. Here’s how to navigate this crucial process:
Firstly, involve not only your solicitor but also your accountant and financier. This ensures your plan isn’t just about protection but also seamless business continuity. Their combined expertise can help structure the transition effectively.
Secondly, consider engaging professionals who specialize in succession planning. While your existing accountant and solicitor may excel in other areas, bringing in experts in this field can provide invaluable insights and guidance.
Timing is key. Don’t postpone succession planning for a rainy day. Start now. It’s a comprehensive process that requires thoughtful consideration. Procrastination can lead to complications down the road.
Lastly, ensure transparency within the family. Share your intentions openly and involve family members in discussions where necessary. This avoids surprises and fosters a collaborative environment, ensuring everyone is on the same page.
“In conclusion, a well-structured succession plan involves the right professionals, timely action, and open communication. Don’t underestimate its importance; it’s not just about handing over the reins but securing the future of your family business.”
Rolf Howard, Managing Partner, Owen Hodge Lawyers
“Succession planning in family businesses can carry additional complexity. Is the next generation suitable to take the reins? Do they even want to?
“Long before a succession plan will come into effect, it’s important to initiate honest conversations with family members about their interest in the business and suitability to run it. Address expectations openly to avoid future conflict. Don’t assume lineage dictates leadership. Assess everyone’s skills, passion, and experience objectively before choosing successors.
“Once you have a plan in mind, make sure to define clear roles and responsibilities for all family members within and outside the business, and communicate them to all stakeholders. This ensures accountability and minimises friction. Create a timeline for when succession will take place and establish a family council or similar body to facilitate communication and decision-making amongst family members.
“Consult legal professionals to draft formal agreements outlining ownership, voting rights, and dispute resolution mechanisms. This will limit any surprises and ensure that things are formalised to prevent confusion or disputes down the track.”
Soibhone Nascimento, Franchise Partner / Business Owner at Poolwerx
“As business owners, we still have to work towards building our business to be a saleable asset. We still need to run the business so that everybody that’s working in it is doing their role to the best of their abilities, regardless of whether they’re family members or not, we still have KPIs around their roles and expect them to perform.
“Leave work at work and personal life at home. When addressing any issues related to behaviour or performance, always have open and direct conversations with the individuals involved, and avoid airing dirty laundry with third parties including non-family members.
“Take regular breaks, whether that’s weekends away from work, holidays, or just time to recharge. It’s important to recognise that if one family member experiences burnout, it can have a domino effect on the entire team, as we intrinsically rely on each other for the business to succeed.
“It’s not just about buying yourself a job. It’s about creating something that’s worth selling. And within that, it’s balancing what’s best for our children now, and what’s best for the business? And how can we make both of those things work together?”
Scott Wiltshire, GM at Oracle NetSuite ANZ
“Creating a successful succession plan for a family-owned business requires clear communication and stakeholder engagement. The approach taken will depend on who is stepping into the leadership role, and whether they want to continue with the traditions of the founder or use the transition as an opportunity to implement changes.
“If legacy is important, it’s key that the successor is aware of the history and aligns their management style with the values of the business. Effective management processes will help a new leader carry the legacy forward and ensure that teams can continue to deliver on business goals.
“In some cases, the succession may help to reshape or evolve the business. A change in leadership can create an opportunity to review systems and processes, and implement new technology that increases efficiency, expands insights, and improves decision-making. This will help successors to keep employees engaged and ensure future changes in leadership are even more seamless.”