Tom Harrison, CPA shares his tips for successful transitioning of a family business:
Succession planning is defined as, “Making the preparations necessary to ensure the harmony of the family and the continuity of the business through the next generation.”
Succession planning may be the single most important process that a business owner enters into in his or her entire career. A successful transition is critical to his or her family but also is vital for the economy of America. A recent survey performed by the U.S. Department of Commerce stated that family business accounts for more than 65% of our country’s gross national product and employs more than 60% of the work force. Almost 50% of the family businesses will experience leadership changes in the next 5 years and a large percent will not make it to the third generation business. Planning well in advance is imperative.
To help ensure that owners achieve the succession they desire, a comprehensive plan should be established and include consideration of a number of factors. Successful plans are written and revisited frequently to ensure the goals remain consistent.
In establishing goals of the owners and the beginning of the succession plan, we must begin with perhaps the toughest of all – the emotions.
Emotions of the owner to recognize in the planning are vital as he or she:
- Has been a dominant force in the business and this will need replaced
- Must face their own mortality
- Resists the urge to relinquish control and power
- Fears a loss of purpose and identity
- May experience jealousy towards successors
And most importantly, the owner must ask the question, “Am I ready to leave the business?”
In an time where it is easy to find instant solutions or immediate results, we all need to remember that the family business has been around for ages and will continue to be the heart and soul of our future economy. Take a step back and think of some of the most successful companies throughout time that began as family businesses. Perpetuating the family business is critical, and a solid succession plan is the way to ensure success.