Family-owned businesses face unique challenges during every phase of the business life cycle. They grow with their founders’ energy, sacrifice and commitment. As the company grows, there will come a time when the founder must step down and let someone else take the reins. That’s where family-owned businesses get tricky. In many cases, the owner has a unique sense of control over the business, having built it from the ground up. The truth is many family-owned businesses fail to survive beyond the founding generation. Northern River Financial can share some of the best practices for continuing your family-owned business success while preserving your legacy.
It’s an adage – Be Prepared. It applies to all your business decisions, particularly this one. Making a succession plan is the single most important issue in preserving the legacy of your family-owned business. Without a detailed succession plan, the founder could be forced into alternative exit strategies. Rather than pass on to the next generation of family management, many family businesses have considered alternate exits such as selling to management partners, employees, outside parties or even closing the doors entirely.
It is important to begin early developing a plan that tackles issues like ownership structures and skills transfers. Start thinking about it preferably five years before the transition date. Develop a plan to tackle issues like ownership structures, skills transfers, and family involvement.
It sounds obvious, but it’s not always that easy. Often the founder has a plan in mind but never really shares the vision. Sit down and specify the exit strategy. If succession is the plan, make it clear where this is headed. In some companies, the successor is clear. There is a family member who has grown up with the business, held numerous roles, and is in a solid position to take the reins. In other situations, a successor may have to be selected and trained.