The Essential Guide to Succession Planning for Family-Owned Businesses

Family-owned businesses seem to be tricky, especially when it comes to transitioning a company to the next generation of leaders. It is a complex process, and it can quickly falter if there is no strategic plan for succession. The succession will involve the transfer of power for both management and ownership, and these two are tightly intertwined. Therefore, they must be considered together. 

There must be a best succession plan that will address the unique needs of the family and the enterprise. Therefore, you need a specialist person to help you make an effective succession plan. You can rely on an expert CPA who can help you in making strategic plans. There are various CPAs, such as Centennial CPA, where you can find your experienced CPA to help you in your succession. Meanwhile, in this article, let’s understand some of the essential tips to make a succession plan. 

  • Communicate ownership intentions: You must be proactive about the ownership planning. It is because when you have proactive plans, it will take your family members into confidence about your intentions. It would help if you had an honest conversation with your family members about your intentions for business ownership and its succession plans. 
  • Establish exit plans beforehand: There are circumstances in which even the successor family member chooses to leave the company or may be encouraged to take a new path. So, in this case, there must be a proper policy design to have exit planning that can protect the business and the family as well.  
  • Train the next generation: You must take steps to train the next generation to run the operations of a business. This training should ensure that there is a long-term vision and business goals so that the next generation is also inclined towards having the best plans for the business after the succession. 
  • Involvement after your retirement: Before making a complete succession, you must make it clear what your role will be after the succession and whether you will take any responsibilities for the business or not. If this is clear beforehand, then it will help the family and the company to avoid any potential clashes between generations. 
  • Decision-making structure: Your succession planning will ensure that there is a clear decision-making structure and governance model for the business after your retirement. It should not happen that when the next generation takes control, there is a conflict among them for decision-making power. It could hurt the enterprise, and therefore, there must be a clear indication of the decision-making powers.