Small family companies that don't have a succession plan in place when the founder dies or retires have a greater risk of failing than a company that has taken the time to prepare for the future without the original owner. The Boston Globe recently reported in February 2016, that roughly 8 out of 10 family businesses do not have a succession plan in place. This can result in arguments among family members on who will be in charge and cause the company to lose focus on what they have done to be successful. Here is a guide on how to develop a family succession plan to keep the company running long after the original owner has left the business.
Choose the Successor
The process of choosing a successor means that you have to separate the needs of the family from the needs of the business. You are going to have squabbles unless you have complete consensus among your family members on whom the successor will be, and chances are, you are not going to have a complete consensus. You need to quantify and qualify the skills of the family members you are going to name to succeed you. You need a family member who understands the daily operation of the business the most, who has a workable vision for the future, and who interacts well with customers, suppliers, and workers to keep things going smoothly after you are gone. This is not a decision you should base purely on the emotion of which family member means more to you.
Write the Plan Down
Having a plan is one thing, but you also have to make it legally binding so it can go into effect if you were to become incapacitated or pass away. The entire plan should be written down on paper and submitted to each affected family member for their approval. The details should include who will be taking over, the conditions that have to happen before the transfer of power takes place, and how other family members will move up in the company to replace the other members in the hierarchy as they also take on new responsibilities. Each member of the family should sign the document to verify they have been informed of the change of leadership that will occur once you have moved on.
Get a Lawyer
While a family succession plan is essentially a business and family decision, it is also a legal one. You should utilize legal counsel to make sure the plan is formulated and written according to legal standards that will stand up in a court of law in case you can't be there in person to defend your decisions from someone who decides to challenge them.
Share25 May 2016
Over the years, I have learned several lessons the most difficult ways possible. One lesson that I have learned is to never try to handle legal issues without legal representation working with you. I have faced fines and penalties that could have been greatly reduced had I hired an attorney to represent me in court. This blog will show you several ways you could benefit from paying for the legal fees associated with hiring an attorney anytime a legal issue may arise. You will also find examples of how things can go terribly wrong if you don't hire an attorney.
