Regardless of how small or large the size of a family business, succession planning for family enterprises presents a unique set of challenges. Not only can it be a complicated, emotionally-taxing process, but it also carries the potential to detrimentally affect family relationships, which can strain the business itself—often to the breaking point. Even if you manage to craft a plan that appeases the entire family, you will have only solved half of the puzzle.
In order to create a successful business succession plan, family founders must find the answers to two equally important and often conflicting questions: (1) What is fair to all family members? and (2) What is best for the business? The difficulty of striking an effective balance between these two factors is evident in the number of businesses that fail to survive succession; some estimate that as little as 12% of family businesses remain viable into the third generation.
Family business owners must work to develop the skills necessary to improve the end-result of business succession, especially in light of the fact that the need for this type of planning is set to increase dramatically in the coming years. Every family is different, every circumstance is different, and there are often no clear answers to conflicts that may arise. Despite this lack of uniformity, there are specific steps planners can take to help facilitate as smooth a transition as possible.
Above is a walk through guide family owners should adopt as their standard approach to attaining the perfect balance between pleasing the family and protecting the business.
Contributed by the Family Business Office Regulator, Dr. Nadine Lia