“Passing the torch” in a family business might be the most important step of succession planning. A successful transition is not the result of an isolated event but rather a progressive and lengthy course of thoughts, discussions and action that must be well planned.
“By 2023, 30% of Québec business owners will retire and will have to transition their business to the next generation” (source: Board of Trade of Metropolitan Montreal).
But this is clearly easier said than done. Transitioning a business to a family member differs greatly from selling to a 3rd party. If you do decide to transition your business to one of your relatives, some key steps need to be followed in order to ensure a smooth and successful transition for all involved.
The Key Steps of a Successful Transition
1. Let people know
Whether you are planning to sell your business or to transition it to a family member, the first step is to talk about it. Let people know that you are planning to retire and live other adventures. Don’t let people wonder, don’t let people be scared about the future. They are thinking about it even if they don’t show it, so be proactive!
2. Ask and listen
Go and talk to other employees, other family members and even your trusted family business advisor. Assess the skill sets required of the person or people who will succeed you. If you have an idea in mind or a potential successor, talk to that person, ask her/him if they have that desire. Then listen. And be sincere.
Evaluating the commitment of the next generation is an important task to tackle during this phase, and even prior. Does your potential successor have the skill sets previously assessed? Maybe your shoes are too big or the business has evolved and required more than one person to build on base you’ve created.
4. Prepare the person – “Guide & Mentor”
Once you have identified the right heir(s) work alongside with them. Be open to their ideas. If you have identified some weakness during your observation, provide them with the appropriate resources to improve them: training, coaching, education, etc.
5. Should you stay, or should you go
When will come the time to officially give that torch to the chosen heir, another important decision should be made. Should you stay as an advisor or totally step aside? That decision is important as it can greatly impact how other view them as the next leader and to the ultimate success of the transition.
The above is not an exhaustive list. It is a perspective from 35,000 feet. Each family has their own unique dynamic, therefore the actions stemming from the above should be part of a well-documented succession plan.
If you want to know more about family businesses, how to manage tangible such as tax and estate planning and the not so tangible family dynamics, please contact us or subscribe to our Newsletter.