Understanding Business Succession Plan

Many of us may once have an involvement in some form of family-owned business and we may actually own one. One of the trickiest things of running a family business is planning the path of succession. Although blood is thicker than money, struggles and disputes could still happen among family members. The truth is that it is quite hard for family members to become objective, when it comes to business succession planning. In reality, succession plan should already be devised when the family-business is first established. A stereotypical family business could start with mom and dad who work full time until their children start coming.

The family business finally thrives and the mom could stay at home raising the kids. Dad continues to work for more than 80 hours each week to grow the company further. Children get everything they want and dad can’t spend much quality time, because he works very hard. Children could go to great schools and they are able to work in the family business as entry-level employees, often with very high salary. Parents have high hopes that their children can run the company, while children can’t think of other place to work other than in the family business. The problem is whether children can share the company based on specific family succession plan. This may sound like an oversimplification, but it still rings quite close to the truth.

In reality, it is possible for children to share a family-owned company. It is important for parents to properly nurture their children, so each generation could increase the company value and put their stamp on the organization. They can exceed expectation during their tenure and the company is always profitable. In fact, the company can become large enough to accommodate all children with each of them getting more than enough income. One thing that we should consider is that the business should be considered as a member of the family and treated appropriately. When children have dispute about the company, they are actually mistreating one of the family members.

Family-owned use different ways to prepare the new generation. As an example, each generation is required to work outside the family after the completion of college for about ten years. They need to start their own business career outside the family and become independently successful businesspeople without any assistance from the family business. When they finally join the family business, they become independent and confident outsiders who have new views about the company. This will make sure that each generation is well prepared to take over the company. In this case, the previous generation should be able to instil proper vision and values among the new generation.

The same situation could happen when the generation is ready to turn the company over to their children. It is common for the new generation to desire changes in the company to allow it better adapt with current condition. However, they should be guided to make sure that they don’t take unnecessary risks.