The most successful businesses start thinking about their transition the day they start their business! Planning for your success is one of the keys to building long term success. Too many business owners do not. The fact is less than one third of family businesses survive the transition from first to second generation ownership. Another 50% don’t survive the transition from second to third generation.
- The founder does not feel the need to change because “it has always worked that way.”
- The founder gets sentimental and logic goes out the door.
- The management team is often based on the family’s pecking order.
- The selected “successor” is often not given a choice as to whether they want to be the successor!
- The founder finds it difficult to relinquish control to the next generation.
As a result, family businesses only change when the pain of not changing is greater than the change itself. When that happens, without planning, the family is then left with just 4 options:
- Sell the business, probably for much less than it could be worth.
- Merge the business with another business (effectively, this is the same as (1).
- Shut the business down and receive nothing for the years of hard work growing the business.
- Stay as it is – no change, and everyone continue to suffer the pain, until the situation becomes impossible and (1), (2) or (3) happens.
Having helped many of my clients through this process, and for my own businesses, I am a great believer in succession planning. Properly carried out, succession planning can add value to the goodwill of your business, it will save family disputes and ensure an orderly transition for you.
With proper planning, the transition can be smooth and the process enjoyable. Building your business is the first part of Business Mastery. Making sure it survives to the next generation takes a lot more work!