In a recent article published in the Silicon Valley Business Journal, Jody Meacham, argues that most family business owners don’t have a succession plan in place. The reasons he says are varied and quite personal: “Many owners feel they’re never going to stop working, they’re too busy, children’s abilities and wishes vary from child to child, and — bottom line — it’s not the legacy that’s difficult to think about, but the death that creates it.”
In such a scenario, it is imperative to get professional advice outside as well as from within the family circle. Moreover communication is key, if future problems are to be avoided after the owners’ death, incapacitating illness or injury. Thus he suggests that:
- The owners’ wishes should be communicated to family, accountants, attorneys and advisers.
- Plans should be documented properly, so the owners’ wishes are clear. Wills tend to be contested.
- Plans should be updated frequently so they evolve with changing circumstances.
On the issue of succession a recent article in The Strait Times by Jeremy Koh, spells out a few tips for smooth succession.
- The topic of succession should be raised early. This is essential as otherwise; the younger generation is unable to plan effectively for the future.
- Sometimes it is necessary to woo family members into the business. Youngsters may develop different interests and may not be receptive to joining the traditional business.
- Training the next generation is crucial. Some businesses assign junior roles to incoming family members so they can gain the experience required to take on larger roles. Some family businesses on the other hand buy a smaller company, to let their son or daughter first run that business.
- Getting outside help in exceptional cases when the next generation is still not ready to take on the leadership role becomes imperative and should not be frowned upon.
Source : Silicon Valley Business Journal; The Strait Times