If you’re running a small family-owned business, you will probably agree that planning for its future is a key priority. Yet, surprising statistics show that just 40% of those running small companies of this kind have thought about implementing a succession plan. Why is this the case?
Contemplating Letting Go
Perhaps the biggest single reason why those running small businesses struggle to implement a succession plan is that they simply can’t imagine ever being able to let go of their life’s work. After dedicating their energy and time to their business over so many years, it can seem impossible to envisage a future without it. Whether their major concern is that the company couldn’t survive without them at the helm or whether they simply worry about what their next chapter will hold, it can be hard to consider the possibility of letting go of the reins.
Although it’s hard to contemplate handing over the business to someone else, it’s important to think about succession planning from a different perspective. Imagine a relay race where the second runner is ready to receive the baton, but the first runner refuses to let go. The race cannot be won in such a way. It may be difficult to hand over control to a new generation but it’s vital to ensure the transition is successful.
What Comes Next
Most people who run their own business enjoy their job. They love the perks and prestige that their work brings with it. As lifespans increase, the idea of retiring at 65 has become more alien. With people living on into their 80s and 90s, there seems to be less pressure to step down. However, again, it’s important to consider the next generation. If retirement is extended into the business leader’s 70s or even 80s, where is the next generation’s incentive to wait until the baton has passed on? There is an ever-present risk that the younger generation, tired of waiting to take over the helm, go off to seek opportunities with another firm, leaving the family business high and dry.
Anyone leading business needs to take the time to reflect on what their next chapter is going to look like. It’s highly unlikely they’ll be spending the next two decades traveling the world or playing golf. Most executives who retire are keen to use their experiences, skills, and energy in a new endeavor, perhaps by mentoring the next generation or even by starting up another business. If the succession plan is to be successful, this issue needs to be addressed.
There Is No Successor
Sometimes, the business founder wants to step down but is finding it hard to source a suitable successor from within the family. This may or may not be the truth. Often, there is a family member who is ready and willing to take over but the founder fails to recognize their management potential.
Remember that failing to plan is, essentially, planning to fail. A successor is made, not born. In successful cases of a business transition, the successor isn’t simply launched into the top position. They must first learn the business from the bottom up.
Developing a plan for succession is a road map for pinpointing then selecting a suitable successor, mentoring that person and allowing them the opportunity to practice their leadership skills. This multi-layered process requires considerable input, not only from the founder themselves but also from other business stakeholders.
Avoiding Adverse Consequences
Failing to develop future talent is something that could eventually risk severe negative consequences for both the business and the family. Should the founder suddenly become seriously ill or even die, a transition would need to take place suddenly and this could lead to crisis decisions being made that would result in disruption and disharmony.
By taking a proactive approach to identifying a future leader and by making preparations for the transition process long before it becomes necessary, it’s possible to mitigate any negative results. Transition isn’t an event – it’s a process. Global Resources LLC, as specialists in the management consultancy field, can help you to plan your exit strategy so that a seamless transition is possible when the time comes to move onto pastures new.