Keeping it (your business) in the Family

The Challenge

So you’ve built a good, even a great business, and it’s getting towards that time when, for whatever reason, you want to step out, back, or sideways.  You need someone else to take over the helm.  But, the last thing you want to do is desert everyone who’s supported you over the years, including your family, by selling it off to some corporate marauder, or perhaps even worse, just cash in on the assets and run – because it’s all too hard.  Your challenge is that you have no clear, comfortable and complete solution in sight, despite having one or more of your children / family / trusted staff willing to take over the reins.

You’ve heard the horror stories of others who’ve gone before you, so you understand that dealing with ownership, leadership, management and identity transitions isn’t easy, and that even the best succession processes come with plenty on in-built doubt and risk.

But then, as a business owner and leader you’re used to doubt and risk – they’re part of your basic job description.  So what is it that makes family business transitions particularly difficult and threatening?  Why do they cause otherwise fearless leaders to lose their mojo and hang on until their indecision becomes everybody else’s problem – typically because they’ve lost the capacity, or authority, to deal with it?

Family business succession should be a process and not an event, because to have any reasonable prospect of success, it needs be planned and executed over a sensible period of time, like any other complex project.   You need the 3 Cs:

  • Clarity – agreed, specific expectations and objectives, for both the family and the business. These should be evidenced in a detailed, written Succession Plan and,
  • Certainty – allocated tasks, roles and responsibilities, per the plan. These cover whatever must be done to effectively, efficiently and responsibly transition ownership, leadership and management from one person, or group of people, to another.  In a family business this usually involves a transfer from one generation to the next.
  • Commitment – effective implementation of allocated tasks, roles and responsibilities. This is where we say: “Execute, OR EXECUTE!”  Because all the plans in the world aren’t worth a pinch of snuff if people aren’t held accountable for doing what they’re supposed to do, when they’re supposed to do it, the way they’re supposed to do it.

The Scenario

Baby boomers were born between 1946 and 1964.  The oldest of them hit 65 in 2011.  The average age of this generation’s business leaders is currently somewhere in their late 50s.  We’re about to be struck by a tsunami of retirements, and the largest transfer of wealth and leadership control the world has ever seen.  And yet, worldwide, around 88% of family businesses are woefully unprepared, because only around 12% have formal succession plans.  Because they’re in reactive, rather than proactive mode, their succession event is likely to be precipitated by a profound crisis, often something to do with the leader’s failing health.  When that happens, both the family and the business will be plunged into turmoil when they’re at their most vulnerable, with their situation compounded by the fact that there are far more sellers than buyers in the marketplace – making even cashing out more problematic.

So there’s a large chunk of an entire generation that is, or who should be, thinking about moving onto the next phase of their lives, with a reduced focus on their businesses, and a burning desire to “do the right thing” by those they leave behind in the business.  They may, or may not, be thinking of this phase as “retirement”.  If they’ve been smart and are well prepared, they’ll be looking forward to moving into a phase where they have more time to do things they genuinely want to do; whether it’s family, hobbies, sport, travel, adventure – or anything in between.

Some worry mightily about how to handle this process responsibly, recognising that the welfare of their many dependants (including family, employees and other stakeholders), relies on them getting it right.  At the same time they’d be less than human if they weren’t also concerned about their own financial security, and how they’re going to fund the life, and the lifestyle they hope to enjoy, for the rest of their days.

The good news is that in many cases there’s a next generation of family members ready, willing and waiting to take over the family business (even if they don’t seem to be putting their hands up and making a noise about it).  Many of these next genners have spent a long apprenticeship working in the family business, sometimes for relatively poor financial rewards.  Many have added substantial growth and value to the enterprise over this period and consider themselves more than ready to take over the reins.  Many also believe, some privately and some more openly, that the time is long overdue for their parents to hand over those reins.

Most next genners have young families and the financial burdens that come with getting established in the modern world.  Because they have 20+ years to go in the business and feel the need to invest in its future, they aren’t usually eager to make large payments to Mum and Dad to fund their retirement – especially if their dearly beloved parents derived a comfortable living from the business during their working lives and chose not to save enough for their retirement while they were having a good time.

What’s to do?

To optimise your options, you need to strengthen your business operations and maximise its market value well ahead of whatever transition you’re hoping for.  Assuming you’re planning a succession within the family, a management buyout, private equity investment, or a trade or open market sale, when you plan to step aside the business must be able to stand out from the crowd in terms of its readiness and ability to meet the challenges of the future, and its ability to be profitable.  From an objective commercial perspective, this demands a credible, effective, properly implemented Continuity and Succession Plan, whether or not the business is staying under family control.

If the business is to remain with the family, there should be a planned ownership, leadership, management and identity transition process that aims to ensure that:

  • The transition is a positive process for the business where, as far as possible, nothing of value is lost and much that is beneficial is gained.
  • The retiring leader is financially secure, emotionally ready (and preferably eager), to enter into a new “life phase”, whatever that looks like.
  • The family, especially the leader’s spouse or partner, is prepared and willing to accommodate the changed circumstances. It can be prudent to think of this as  “caged bear syndrome”.
  • The successor is fully informed, trained and grounded in the business, and is ready, willing and able to take over the reins of leadership, when their time comes.

Both internal and external stakeholders should see the change as being positive for the business and, even if the process starts subtly, there should be a conscious increase in effort and focus as the final handover gets closer.

If the business is not going to remain under family leadership and/or ownership, your plan to maximise value and sales appeal should:  (a) pay attention to things that are likely to attract potential purchasers and, (b) take pains to fix anything that could turn them off.

4 Stage Succession Planning Process

The following diagram summarises the individual process stages that make up a comprehensive succession plan:

  • Information gathering and context setting.
  • Situation analysis, process planning and candidate selection.
  • Candidate training, grooming and monitoring.
  • Implementation and handover.

The detailed task listing has a sequential flow, although many tasks can be undertaken concurrently.  Despite looking quite complicated in all its diagrammatic glory, each component is relatively straightforward when the process is approached knowledgeably, systematically and with enough time available to address each task and issue calmly.  Using an experienced and independent facilitator to guide the process can save a lot of time and grief.

4 Stage Succession Planning Process

1.  Background2.  Evaluate3.  Plan4.  Implement
Family & BusinessFamily & BusinessBusiness OnlyBusiness Only


–      Identify need for succession process

–      Appoint team to manage process


–      Key objectives

–      Background facts

–      Values, visions & goals

–      Plans (existing)

–      Major issues, needs & challenges

–      Resources available

–      Timing issues and requirements

–      Candidates

–      Profile & style of current leader.


·       Plans & goals (viability & congruence)

·       Health & stability

·       Support resources

·       Available candidates

·       Congruence of individual & collective values, visions & goals

·       Impact of staff

·       Impact on other stakeholders

·       Impact on Family (immediate & remote)

·       Timing imperatives & practicalities.



–      Succession objectives

–      Key criteria

–      Candidate criteria

–      Decision making process

–      Selection process

–      Communication protocols & process

–      Development program (successor & successee)

–      Transition program (successor & successee)

–      Monitor & measure procedures

–      Feedback process

–      Modification process

–      Contingency plan.


·       Select & anoint candidate

·       Announce choice

·       Implement agreed development & transition programs

·       Monitor, assess & respond to successor performance

·       Monitor, assess & respond to successee performance

·       Evaluate progress at key milestones

·       Accept/reject chosen successor

·       Handover ceremony.




Succession is often regarded like a death in the family.  In some ways that’s a good analogy – it’s as much a natural part of the life cycle of every business as death is part of the natural cycle of life.  When succession is treated as a natural and inevitable element of business continuity; when it’s seen as a “when” issue, and not as an “if”;  then the fears can be pushed aside, and planning is empowered to do its work.  When that happens you’re back in control.  And when you’re in control you can drive better outcomes.  And isn’t that what everyone wants?

Bonus Materials:  10 Essential Wisdoms for Successful Succession

(from: “The Solutionist Guide to Family Business, by the author)

The succession process has been fraught with issues and complications since the first caveman felt compelled to hand over his flints.  It’s formed the subject matter of stories and dramas for as long as we’ve had recorded words, and will no doubt continue to do so.

With this in mind, I offer the following ‘10 Essential Wisdoms for Successful Succession’.  I hope you find them useful:

  1. Do make succession a controlled process rather than an event.
  2. Do be professional, not protectionist. Provide objectivity, independence and impartiality for the sake of your business and for those whose lives depend on it.
  3. Do recognise that there are always other options. Search and think inside and outside the square.
  4. Do appoint someone to be a long term steward, rather than an owner, of the business, its people and its values. Their motives for seeking the role should place business continuity above personal gain.
  5. Do respond to the old leader’s fear of the abyss. When the business has been their life, moving out of it is like stepping into the void.  Help to ease their move.
  6. Do work out how much is enough? How much money does the old leader need to be financially secure for the rest of their days?  Let the balance go if it will help the succession plan and create sustainable harmony in the business and/or in the family.
  7. Don’t just search for or try to create a clone of the current leader – the successor should stand on the old leader’s shoulders, not just fill their shoes.
  8. Don’t demand a 60 year old’s behaviours and values from 30 year old candidates. Exchange safe horizons for credible, 20+ year visions for growth and prosperity.
  9. Don’t ‘hand over the reins without getting off the horse’. Don’t demand responsibility without giving authority and ownership, however you stage the process.
  10. Don’t surrender your business and family timing objectives purely for tax/wealth benefits. Weigh personal gains against financial pains, and then go with what feels right – according to your personal values.


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