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Effective Family Business Succession Planning – For Further Growth Of Your Business Baby

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The importance of family businesses can be judged from the fact that almost 35% of the Fortune 500 companies are family controlled public or private businesses. The major issue for the continued success of these family businesses is a proper succession plan.  There are certain factors which determine the effectiveness of a succession plan for family business.

Factors Affecting Family Business Succession Planning

Some of the major points which can become points of discord during transfer of ownership are as follows:

  • General factors: A general rule is that among the entire lot of family-owned businesses less than half are successful in making a smooth transition to the following generation. This is especially more in case the retiring member is divorced or if shares are held by non-active member of the family.
  • Similarity of interests: There may not necessarily be alignment of interests between the two generations and differing opinions about the retirement income to be drawn by the older retiring people may arise.
  • Inheritance Issues: Death duties and taxes on inheritance may play a crucial role in smooth transition.

How To Ensure An Effective Family Business Succession Planning

The ensuing steps can be followed to help the family-owned business to be passed on to the next generation in as smooth a manner as possible.

  • Lay Down Goals Of Continued Business

It is essential to clearly lay down what the business and personal goals of the next generation handling the business would be. If necessary, bringing in professional management can also be considered. A team of professional advisors in any case, need to be retained. A collective vision envisaged for the business will go a long way in making it more successful in the future.

  • Clarity In Responsibilities

There should be clarity on the process of running the business and carrying the varied responsibilities. A clear method for resolving disputes should be laid down. The succession plan needs to be documented in writing and communicated clearly to all family members involved.

  • Determine Succession Plan

All points related to the succession plan must be laid down to the smallest detail. The owners and managers of the business should be clearly defined from one other; so also the roles to be played by each member of the family in the business. If there is a need for any professional help or otherwise from outside then that also should be stated clearly in the plan.

  • Determine A Viable Estate Plan

The issue of tax liability has to be addressed effectively as the business gets transferred to the new owners. Owner estate planning would ensure that all the relevant taxes are minimized and there are no delays in the transfer of ownership.

Summarizing

One of the biggest challenges in determining a succession plan for your family business is deciding whether the family business should be retained within the family or bequeathed to outsiders, whether the family members are sufficiently interested in carrying your legacy further or not. A good family business succession planning which lays down a time frame for implementation of the plan ensures the continued success of your hard-earned efforts.

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