Succession planning as a family business
Running a successful family business can be overwhelming. However, it is crucial for businesses and owners to take the time to assess their succession planning. While each business is unique, there are common issues surrounding succession planning as a business owner. If not properly planned, this could lead to breakdowns in family relationships. Failing to plan for leadership or ownership changes can have significant consequences and hinder the long-term survival of a business and the preservation of wealth.
A solid succession plan for a family business can not only prevent this, but also drive business growth, consider tax efficiency savings, and set the stage for owners' retirement while preserving harmony within the leadership team and family.
What does succession planning involve?
Effective succession planning involves not only deciding who will run the business in the future, but also determining the type of business they will run.
It can be as simple as naming a family member to take over when you are ready to step aside or a more complex restructuring of the business to align with the long-term objectives of all the parties involved.
Many business owners and families may put off succession planning due to the lack of time or fear of challenges. However, embracing the planning process is important to avoid disruption, uncertainty, and conflict in the business.
Involving future leaders in the business early on allows them to gain financial benefits and understand how the business operates. In some family businesses, the older generation expects the next generation to maintain continuity without deviation from established practices. This can, in some cases, hinder growth and innovation and make the next generation feel powerless.
Transitioning to the next generation of leaders can infuse fresh thinking and elevate the business while sustaining the family and business legacy. Observing the leadership team can guide rising family members or future leaders. By watching, learning, and participating in discussions, they gain valuable education and build relationships for future collaboration.
Observation also helps build emotional readiness for future pressures. Present and future leaders can work together to formalize shared values and principles, try new approaches, and identify gaps that need to be addressed with the help of independent board members and advisors. For example, rising family members can attend board meetings as observers and ask questions afterward. This level of inclusion helps them build decision-making abilities, find inspiration, and strengthen business knowledge and skills.
What about the ownership structure of bringing in the next generation of family leaders?
In family businesses run as companies, family members can hold shares with specific rights to incentivise them and pass on wealth without the elders losing control.
Overall, having a solid succession plan drives business growth, engages the next generation, considers taxes, and allows retirement goals to be met.
It also provides certainty and transparency for the future direction of the company, promoting business success and family harmony.
It's never too early to start planning.
We can help
We can provide tailored tax services to help individuals, families, and businesses meet their goals. We understand the challenges faced by high-net-worth individuals and entrepreneurial families and can assist with succession planning. Feel free to reach out to discuss any queries or explore your options.
