{"id":204529,"date":"2021-11-30T15:52:11","date_gmt":"2021-11-30T23:52:11","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=204529"},"modified":"2022-04-26T08:37:28","modified_gmt":"2022-04-26T15:37:28","slug":"a-guide-to-passing-down-your-family-owned-business","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/a-guide-to-passing-down-your-family-owned-business\/","title":{"rendered":"A Guide to Passing Down Your Family-Owned Business"},"content":{"rendered":"

When a family-owned business shifts from one generation to another, suggestions for improvements often arise. While fresh ideas can breathe new life into a business, they can also create friction in the family and possible brand confusion for customers. Creating a family business succession plan can help with the transition in leadership and strategy, yet only a third of family-owned businesses have a plan<\/a> in place.<\/p>\n

“Succession planning is quite possibly the most misunderstood people-process in business,” says leadership development consultant Michael Timms<\/a>, author of “How Leaders Can Inspire Accountability.”<\/p>\n

“A common misconception is that it’s the financial and legal transition of a family business from one generation to the next,” he says. “But succession planning should include finding and preparing internal candidates for much more than just the CEO position.”<\/p>\n

If you don’t yet have a comprehensive plan in place for your business when you retire, here’s how to shift leadership from one generation to another.<\/p>\n

Creating a Family-Owned Business Succession Plan<\/h2>\n

The purpose of a succession plan<\/a> is to protect the future of the business as well as its customers and employees. Timms says succession planning can be boiled down into three essential steps:<\/p>\n

    \n
  1. Outline the competencies required for potential successors to fulfill key positions.<\/li>\n
  2. Identify candidates who could fill key positions.<\/li>\n
  3. Design a development plan for succession candidates to gain the competencies required to perform these positions.<\/li>\n<\/ol>\n

    “Unfortunately, most businesses act as though there is only one step: identify succession candidates,” says Timms. “This is precisely why most succession plans fail, family business or otherwise.”<\/p>\n

    Timms recommends that families identify specific competencies a successor needs to be successful in running the business \u2014 such as financial acumen or staff management. Then, focus on expanding the successor’s experience and knowledge in those areas. Include timelines and milestones, and set up a schedule for the succession candidate to regularly report their progress.<\/p>\n

    “In my experience, it is best if the succession candidate meets with someone other than the incumbent to review their progress on their development plan to avoid potential conflicts of interest or bias,” he says.<\/p>\n

    \"Workers<\/p>\n

    Avoiding Potential Pitfalls<\/h2>\n

    The top two reasons for family-owned business succession failures are (1) breakdowns in communication and trust, and (2) the succession candidate was insufficiently prepared, says Timms.<\/p>\n

    “The root cause of almost all relationship breakdowns is unmet expectations,” says Timms. “There is a surprisingly simple solution to this problem: discuss and agree on expectations of one another.”<\/p>\n

    Timms suggests having each person ask one another tough questions:<\/p>\n