Logan Roy, the patriarch of the family business in the HBO hit show Succession, is struggling with it. Countless other small family businesses are struggling with it.
What’s the “it”? It’s how to transition a small business from one generation to the next. While passing the control of the family business may seem straightforward, it is fraught with hidden pitfalls. Interfamily dynamics, alternative strategic ideas, and the fear of losing control are all factors that require a deep review when crafting a succession plan.
Here are a few challenges you may face when time comes to transition your business to the next generation.
#1 STRATEGIC DIFFERENCES
As the founder, you've run the business one way - your way. It has been successful, as there is business to be transferred.
However, the next generation may see future opportunities differently. It is best to have a series of discussions with the next generation to determine the best strategic direction for the business on a go forward basis. It is also important to bring the next generation of leadership into these strategic discussions as early as possible. Doing so will give them context and understanding of previous decisions and prepare them for future decisions and issues that the business may face.
#2 I'VE GOT MY OWN PLANS
A serious problem for some small businesses owners is that their heirs actually may not want to assume the business. In this case the succession plan will need to include how the business will be sold or dissolved and who will oversee the process.
#3 SIBLING RIVALARY
We have all had disagreements with our brothers and sisters growing up. Unfortunately, now that money is involved, these disagreements can escalate into very serious and lasting issues that can potentially upset family dynamics for the long term.
Navigating who gets what is a minefield which requires careful consideration. You should try to get alignment with you succession decisions through open and candid conversations with all the interested parties. Doing so will ideally eliminate hard feelings or resentment. Many small businesses have found success in having multiple family members involved, but these businesses were able to get an understanding and defined roles for one another.
#4 I'M NOT LEAVING
The owner has grown the business and invested a substantial amount of their time, effort and money to make it the success that it is today. Consequently, the idea of simply walking away from the business is a difficult and often unfathomable decision that they may never want to make. Moreover, in some cases owners may believe the business defines who they are as a person.
Where possible it is advisable for the owner to attempt to step back from their role to get a taste of what life might be like without pouring their heart and soul into the business 24/7/365. Furthermore, as we all know our time will come to an end and failing to plan is planning to fail. It is critical for the owner to understand what they'd like to see happen when they are no longer capable of running the business. They need to leave their wishes to their heirs as to who will either run or sell the business.
To Sum Up….
Your business may not be a billion dollar empire like Logan Roy's but by addressing some potentially difficult issues now you'll be able to ensure an orderly transition of the business when the timing is right. You owe it to your business – and to your family.
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