Within a few years of starting your business, you’d do well to begin to look at succession planning, says ProfitShare Partners founder and CEO, Andrew Maren. A new year is a good time to get many things documented. Not least, your succession plan.
“Succession planning, as part of your long-term business blueprint, is vital. However, given the entrepreneurial spirit that got your company to where it is now, I understand any reluctance to even consider handing your ‘baby’ over to new management,” Maren says.
“Without formal succession planning, family-owned businesses, in particular, risk not being sustainable. Some SME founders think it’s simply a question of informally handing over their business from one generation to the next, especially if they have brought their adult children into the business,” he suggests. “They do not want to plan or even think about their withdrawal from the business.”
Why succession planning is vital
Creating a succession plan outline is essential to achieving a long-term legacy in a family business. “Your blueprint should include, among other things, defining when family members may work in the business; which positions they show a particular flair for; how profits should be distributed; and – importantly – who will likely be the best choice for future leadership,” Maren asserts.
“Your plan will not only come under regular scrutiny by colleagues – but, if your colleagues are family, choices may be taken personally too and cause issues within the closest of families. Communication around why you are making certain choices must be careful but consistent.”Andrew Maren
Issues with the family blueprint
Any company founder who has hit their industry “sweet spot” with their product or service will not want to hand over to a team who may look to “fix what isn’t broken”, notes Maren. Here are some of the hurdles you may need to jump:
- Reluctance to hire executives from outside the family, even if that expertise may be what keeps their company succeeding
- Failure to embrace innovation because “we’ve always done it this way, and it has worked”
- Conflicts within the family, where jealousy and hurt feelings regarding a leader’s choices become the dangerous dinner-table talk
- Lack of long-term strategic planning that includes the possibility of hiring non-family members
- The absence of the founder’s initial drive, vision and determination
“Owing to a study undertaken years ago and since found to be flawed, many SMEs still believe that the family-run small business will burn itself out after three generations,” says Maren. “It may happen – but a robust succession plan could mean your business thrives for a century or more.
“Just as you draw up your goals for a new year in the first quarter and update them to include innovative new technology or methods of working that’ll sustain you for the long term, you should draft a succession plan and keep an eye on it as you discover new talents or a lack of interest in the pool of individuals you may be looking at to take over in the future.”
Again, Maren reiterates the difficulty any entrepreneur will have with handing over their legacy to others – even family. “Just as my initial ideas for ProfitShare Partners were written, re-written, scrapped and reinstituted until I had a business, I know that I would like to see the opportunities in our company given to so many who will hopefully live long and prosper.
“It is the desire for broader ongoing success that sets a great business apart from a good business,” Maren says, adding that if your business has sustained you and your family and colleagues so far, surely putting a plan on paper for its ongoing growth and success is a good idea now?”