Generational succession – handing your business across to your kids or family – sounds simple enough. But, many families end up in dispute right at the point when the parents, business, and children are most vulnerable. It’s important that generational succession is managed as closely and diligently as if you were selling your business to a stranger, if not more so, to avoid misunderstandings and disputes – you need to make sure that everyone understands what the transition will mean and everyone is aware of their role and responsibilities.
If you are looking to hand your business to your children or relatives, there are a few key issues for you to think about:
- Capability and willingness of the next generation: do your kids really want the business?
- Capital transfer: how much money needs to be taken out of the business during the transition?
- Income needs: ensuring remuneration is agreed upon and is on commercial terms
- Operating and management control: the transition of control to the incoming generation
- Transition timeframes and expectations: it is often a process, not an event – sometimes over an extended period of time
- The need for greater formality and management structure: roles, responsibilities and KPIs should be agreed upon and documented
- Managing and maintaining family relationships: a key component of a successful succession plan is the ability of all parties involved to separate business issues from family relationships. This is achieved setting clear goals together, and have a clear documented plan.
Need help in formulating a successful generational succession plan? Tim Davis, CEO and Managing Director of HFB – is our specialist in succession planning.