Picking a successor for your family business

Running a family-owned business can often be tough on family relationships, and no more so than when a successor needs to be found.

The decision of who to hand the reins over to should consider both the needs of your business and the potential effects it will have on your family relationships. While finding the right person for the role is of course crucial, the last thing you want is to create horrendous rifts that will ruin your Christmases for ever more. So here are some tips to help make sure you get the process and the decision right if you want to keep the business in the family:

What to consider

Passing a family-business down to the next generation is a goal of many small business owners. A number of people facing this situation would no doubt feel great satisfaction that the operation they have created will continue to provide for family members for years to come.

The statistics however, show that it is a process fraught with risk. As few as one third of family businesses succeed when taken over by a second generation, with the figure falling by half again if it is passed to a third generation. These findings suggest that younger family members don't always have the attachment to a family business or are unwilling to provide the time and energy needed to keep it successful.

Therefore, if you really want your business to remain in the family you must ask yourself 'do my relatives want to do this and will they be any good at it.' Blood runs thicker than water, but you must weigh up the effect it might have on your family relationships or yourself for that matter, if the business starts to struggle.

Some people might take a laissez-faire approach and think that once the business it out of their hands it will 'be what it will be'. Others though will want the business to grow and prosper and will be distraught to see the business hit trouble. You need to think carefully about your attachment to the business and how it will affect you if things start to go wrong in new hands. 

Talk to your family

Organise a get together with your family - preferably out of the office or business environment - to discuss your plans to find a successor. Before you talk about succession plans, make sure family members understand how the business has been built and what it means to you and any other family that have helped run it. This will give those interested in leading it a full appreciation of what they will potentially be inheriting. Then it is time to allow family members a chance to express their desire to lead the business.

It is also recommended that you tell other high-ranking non-family employees from the outset that you wish to keep the business in the family. This will help guard against any potential resentment towards you and your successor.

Making a decision

If there is more than one suitable candidate for the role, it might be wise to take some of the emotion out the process by asking those interested to submit a formal job application. By evaluating candidate's skills, experience and desire for the job, you will give yourself a greater chance of making a decision based on merit, rather than other influences. This will also allow you to justify your decision to unsuccessful candidates if they feel hard done by.

Going outside the family

In some instances family members just don't want the burden of taking over the family business or they may have career goals outside the business that they wish to pursue. Family members may even see the business as a nest that they want to fly from in order to make their own life. If this is the case, don't try and fight it; you might end up causing damage to your relationship. On the other hand, you might feel that all your relatives are simply not right for the job. In either of these cases, it is best to go outside the family to find someone to take over the business.

Give the process time

Finding you successor is a crucial decision and should not be made hastily; allow plenty of time for whoever you choose to become familiar and comfortable in the role before you officially hand over the reins. Also, before you leave, clearly establish with your successor if you want to have a say in significant decisions that the business makes, such as selling it. This will also help guard against fracturing family relationships in the long term.

Passing a family business on to a family member can be a stressful event. In many cases succession plans have come unstuck due to ill-conceived hand-overs that either take place too quickly or fail to evaluate the competency of the incoming family member. However, by clearly outlining the process, knowing exactly what skills you want in your successor and conducting the process in a suitable timeframe, you can help your family business stay successful once you have left.

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