If you spent a lifetime creating a stable, profitable business, you might find that passing it down to your children is a real challenge. A well-planned, well-crafted succession plan creates security and accountability, not just for you and your kids but also the employees who rely on you.
What goes into a succession plan?
While succession planning is highly individualized, you will most likely want to decide:
- Who the next CEO will be
- If there will be a division of responsibilities amongst your successors
- A timetable for this eventual handoff
- A training program for the future owner
This plan, once in place, will guide the next steps for your business, and it is vital to get it right.
Risks to family businesses
According to a fact sheet compiled by Cornell’s Johnson College of Business, family businesses last an average of 24 years. With each successive generation, the business is more likely to fail, with just 13% making it to a 3rd generation and 3% lasting longer.
While those seem like dire numbers, it’s important to keep that in context. Some business has a natural life span and may eventually run its course. Additionally, interest in entering a family business may wane in successive generations.
However, a succession plan doesn’t have to hand your company to your children, even if you inherited your business from your parent. You may consider handing the business’s reins to a trusted employee who wishes to take over for you.
The final decision
Once you’ve decided how you’ll pass on your business, it is important to follow through. Building your business was the effort of a lifetime; handing it off doesn’t have to be.