The Truth about your Succession Preparation ( 2min read)
Abraham Lincoln once said, “Give me six hours to chop down a tree, and I will spend the first four hours sharpening the axe.” The wisdom behind those words is simple, yet profound: careful preparation is the key to competent execution.
Family business succession is very much like that. To pass the baton from one generation to the next, family businesses must prepare well in advance of the transition. You would have heard time and again, about the importance of a succession plan. But does your plan help if the business owner is unable to work tomorrow?
Prudent as that might seem, research indicates that only about half of the family business owners in America have a written succession plan in place. In Canada, that number drops to 17%. Latin America and China are both at about 10%. Family businesses need a succession plan.
But even before efforts are put in to crafting a succession plan, thought must be given to securing the immediate day to day existence of the business in the form of a continuity plan. This operational insurance is frequently overlooked. However, chances are high that a business owner becomes incapacitated in some way that affects the operations. If this happens through sickness or even death, the business may falter and fail to even get to the point of a natural succession transition. How will the bills be paid? How will operations continue? Who are the business’ key suppliers and customers?
As the old cliché goes: if you fail to plan, then you’re planning to fail. In our experience with family businesses, we see that play out over and over. Companies with owners who don’t find the time to craft a succession plan for their company’s future. Fewer still who find time to document a continuity plan for their company’s current operations.
Failure may be an option for some family businesses, but not for those who choose to prepare.
If owners roll up their sleeves, communicate thoroughly, and prepare in advance, then there will be hope for securing the current and future existence of the family business. Businesses need a continuity plan and a succession plan. With these, family owned businesses will approach the succession transition with a well-sharpened axe—ready to cut down whatever comes their way.
How well have you prepared your family business for the reality of today and the transition ahead? Take our free assessment today to gauge your succession preparation.